Last year, investors have questioned the artificial intelligence trade, which has seen electricity stocks surge in 2018, as they deemed it best to attack data center trading. Vistra Corp. was the S&P 500’s beloved in 2024, and its value was more than tripled to become one of the best-performing stocks as investors were hoping to benefit from the increased power demand in the data center. However, Vistra’s shares fell more than 11% this week. Management failed to convey short-term transaction prospects to shareholders in the company’s fourth quarter revenue call on Thursday. Investor trust in the Dallas area company is fragile, Jeffreys analyst Julien Demoulin Smith told clients in a memo Thursday. It’s been almost a year since Talen Energy was exposed to the power industry’s competition to secure deals with tech companies after Amazon purchased a data center with the Pennsylvania Susquehanna Nuclear Power Plant, owned by Talen. The market was getting more impatience as Vistra made a similar announcement. VST 1Y Mountain Vistra, the failure of Vistra to secure data center trading for a year comes when investors are already questioning how much electricity data centers will consume. China’s Deepseek AI Laboratory rattled the market in late January, with investors worried that the R1 model would be cheaper and more energy efficient than its US competitors. Vistra stock fell over 20% in February. Talen Energy has dropped 5% this week and more than 6% in February after tripling its value in 2024, with Jefferies reaching its $167 price target, up 25% since the end of Friday. Street analysts are also bullish on Vistra with an average price target of $191, up 43%. “It’s clearly unsettling,” Vistra CEO Jim Burke admitted investors’ complaints about the fourth quarter revenue call. The company faces regulatory uncertainty regarding data center trading in the Texas and PJM markets, covering 13 states ranging from the Mid-Atlantic to the Midwest, Burke said. Vistra is in consultation with regulators and communities who are worried about how finding a data center next to the power plant will affect the electrical grid, Burke said. The deals are complicated and Vistra focuses on “putting points on the board” by winning decisive agreements to boost shareholder trust, the CEO said. “And that’s not where we’re still in these deals, but we’re working hard to get there,” the CEO told investors in a revenue call. Burke, who worked for Vistra and its predecessor for 21 years, remains bullish on electricity demand, with load growth diversifying across the industry. A Tulane graduate said the AI data center is “just one aspect of growth” and acknowledges investors’ fears about future demand. Angie Storozynski, an analyst at Seaport Global Securities, pushed Burke down the reason that discussions with regulators have yet to be resolved nearly a year after Talen’s Amazon announcement. The CEO said he was disappointed that the speech had not progressed any further. Taren’s contract with Amazon came into trouble after the Federal Energy Regulation Commission rejected a request to increase the amount of electricity sent from the Susquehanna Nuclear Power Plant to the Amazon Data Center. At the time, the power stock fell over due to the decision of FERC. However, Talen CEO Mac McFarland insisted that the US was in the “early innings of the AI boom” this week during his own company’s fourth quarter revenue call. “The demand will probably move around, but the demand is there. We don’t see any signs of slowing down,” McFarland said. Amazon Data Center Campus travels “full steam” at 300 megawatts that Susquehanna can offer. Storozynski also pushed Talen CEO Mac McFarland for why his company did not announce a deal beyond its Amazon contract. “We’re clearly feeling uneasy,” the analyst said of revenue calls between the analyst and shareholders. McFarland said the lack of new deals across the industry is not a sign of sluggish demand. “It takes time to reach an agreement, saying, “I have an appetite and it takes time.” He added that data center developers are growing interest in natural gas as nuclear deals face scrutiny from regulators. “Gas trading fills the gap,” he said. The Nuclear Bureau “has a carbon-free aspect, but gas needs to fill the gap.” Wall Street analysts say the average price target for the Houston-based power provider is $270, meaning 30% upside since the end of Tallen on Friday.
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