Constellation and Other Nuclear Stocks Live and Die on AI News Now. It Is a Problem.

Nuclear energy stocks tumbled on Monday, continuing a downswing that started on Friday. The stocks’ fortunes are closely tied to growth in artificial intelligence, and there’s news that the demand for power from one big tech player may not be as high as expected.

Two reports from analysts at TD Securities released on Friday and Monday said Microsoft 

MSFT

-1.03% canceled some data center leases, amounting to a couple of hundred megawatts—or enough to power 150,000 or so homes. The report on Monday said that Microsoft’s spending is being supplanted by other players like Oracle 

ORCL  +1.28%.

The mere hint that a big player is pulling back was enough to rattle the market. It’s similar to what happened to these stocks when Chinese AI company DeepSeek suggested that tech firms can make AI products that use less power.

Microsoft, in a statement to Barron’s, played down reports of a pullback, saying that while it sometimes makes spending adjustments, it’s still on track to spend over $80 billion this fiscal year on infrastructure “as we continue to grow at a record pace to meet customer demand.

“While we may strategically pace or adjust our infrastructure in some areas, we will continue to grow strongly in all regions,” a Microsoft representative said.

Constellation Energy 

CEG

-5.88%, the country’s largest owner of nuclear plants, was down 6.9% in early afternoon trading. Vistra Corp. VST -5.11%, another large nuclear and natural gas plant owner, was down 3.6%.

Nuclear reactor developers Oklo and NuScale dropped 9% and 1.2% respectively, after previously being down much more.

Paul Dotson, equity trading managing director at TD Securities, wrote in an email that the market appeared to be overreacting to the news. (Dotson wasn’t involved in the reports.) The news “is being misinterpreted,” he wrote. One issue is that the stocks had risen a lot beforehand and investors are “viewing news from a negative perspective—especially from sectors and themes which have outperformed.”

The selloff could signal a larger long-term issue for the stocks.

Nuclear and AI have been a great match over the past year. The nuclear stocks have soared on expected demand from new AI data centers owned by large tech firms like Microsoft. The tech companies like nuclear power because the electricity the reactors produce is reliable and the reactors don’t emit carbon, allowing the companies to meet carbon emissions pledges.

But the nuclear-AI connection isn’t always a great thing for nuclear companies. Upstart nuclear companies like Oklo have to prove over a long time period that they can construct and operate plants at reasonable costs. But their overall value is jumping up and down based on rumors or whims about the intentions of tech companies. The fate of the stocks can fluctuate on an hour-to-hour basis based on news they have no control over.

Write to Avi Salzman at avi.salzman@barrons.com