AI data centers need energy, and that’s what’s made the stock price of aptly-named NRG$NRG ( ▲ 1.18% ) rise 88% in the past year. As Google co-founder Eric Schmidt explained to the House Energy Committee in April, “Many people project demand for our industry will go from three percent to 99 percent of total generation: an additional 29 gigawatts by 2027 and 67 more gigawatts by 2030.”
That’s a lot of gigawatts!
This presumed, ahem, surge in demand for data center power has been pushing up energy stocks, as producers and utilities rush to bring new power sources online, from solar farms and natural gas generation to retired nuclear power plants.
Another firm, Constellation Energy $CEG, also plans to revive a surviving reactor at the infamous Three Mile Island, PA plant — which had a literal meltdown in 1979. The plan would give Microsoft $MSFT a steady stream of 835 megawatts of power for a nearby set of data centers. For context, that’s enough energy to power 700,000 homes.
But of the four national independent energy producers, only NRG is making a hedged bet: Instead of building more nuclear plants and exclusively signing single-shot contracts with utilities and data centers to take its power, Houston-based NRG is also expanding into the retail energy supply and energy trading business. That means it’s selling energy to customers who may be connected to a local utility’s cables, rather than wholesaling it to the local utility, or building a power plant next to a data center. With a mix of generating stations — NRG is acquiring several sets of gas-powered plants — NRG can sell power that it’s either generated from its own plants (mostly natural-gas powered, now) or that it’s bought on the electricity market, promising customers a steady supply at a steady rate on a 10-year contract.
“There’s general enthusiasm in the market for any type of power producer and retail energy supplier who will benefit from increased electricity demand from data centers, onshore manufacturing, and electric vehicles,” said Travis Miller, an energy strategist at Morningstar Securities Research. “Specifically for NRG, investors have caught up to the idea that a retail energy supply business could be just as attractive or even more attractive than a direct power generation business.”
Likewise, betting exclusively on AI growth might not be such a safe idea. A study by the MIT Technology Review showed the share of US electricity going to data centers could triple by 2028, from its current 4.4% to 12%. That’s not quite Schmidt’s 99%.
That’s where NRG’s bet-hedging strategy could pay off, says Miller. “We’re still in the very early stages of the data center expansion,” he said. “Who knows what the state of the tech industry is going to look like in two or three years?”
In the highly regulated energy industry, a battle between consumers and AI firms for a limited power supply could also end with power costs capped, killing profit margins, and the long-term risks may grow of either increased competition, flattening margins, or regulators putting the brakes on new power plants. “I think,” said Miller, “that the market might not appreciate the long-term risks.”
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The Usual Suspects
- Did Meta just concede it’s not smart enough? Mark Zuckerberg has a new plan to fight the Facebook blues. Meta $META is creating a new AI research lab pursuing “super-intelligence,” and has hired 28-year-old Alexandr Wang, the founder and CEO of start-up Scale AI, and may invest billions of dollars in his company. Meta has offered seven- to nine-figure comp packages to dozens of researchers at top AI firms, including OpenAI and Google $GOOG, the New York Times reports. Meta needs a boost. A survey released earlier this year by VPN Express showed 32% of 18- to 24-year-olds and 35% of 25- to 34-year-olds say they’ve significantly cut back time on the company’s various platforms. No word yet if Meta is recruiting on planet Krypton although that movie is coming out this summer and it sounds like it may have a similar budget to this company push.
- Is 27 > 23? While 23andMe $MEHCQ sits in bankruptcy court, likely to be sold with all of its 15 million customers’ genetic data to Regeneron $REGN, a pharma company that wants the data to develop new drugs. But the attorneys general of 27 states have told the court: “hold on.” In a suit filed Monday, the AGs say 23andMe needs to have new permission from each and every customer before their data is potentially sold. The company earlier claimed that 80% of customers would let their anonymized data be shared. It’s a rule familiar to every parent and schoolkid: No permission slip, no field trip! But without the data, the remains of 23andMe are essentially worthless. Hence the bankruptcy court.
- Warner heads for Splitsville: Warner Bros. Discovery $WBD CEO David Zaslav’s grand plan to combine two storied brands, WB and Discovery, into a powerhouse studio and streaming firm has failed. After losing about 60% of its market value since the April 2022 merger, Zaslav and WBD’s board have agreed to slice up the pie. The Warner movie studio, television production, HBO Max, and DC Studios will become “Streaming & Studios.” Cable channels CNN, TNT, Discovery and its European over-the-air networks will operate as “Global Networks.” The split will take about a year to complete. Zaslav’s strategy was that bigger is better, but beyond the decline of cable, the massive debt he amassed to pull off the deal and investors souring on the company’s future killed the share price. So what happens to Zaslav? For now, he runs the studios division, but as Slate’s Hollywood columnist Nitish Pahwa wrote, Zaslav is “all out of ideas.”
- It looks like you can spell Apple without “AI.” At Apple’s Worldwide Developers Conference this year, there was very little focus on new AI tools, and analysts are worried that without a giant, well-funded push into AI like, say, Meta’s, Apple $AAPL could fall far behind the pack. “The big risk is that you could have users go to ChatGPT or some other product that consumers become dependent on,” analyst Carolina Milanesi of Creative Strategies, told the New York Times. Or Apple could buy an AI company with its enormous cash pile. What do you think is more likely?
- Mickey’s got his Hulu hoop! Disney $DIS has now taken full control of Hulu from Comcast $CMCSA, ending a year-long dispute over how much Disney still owed for Comcast’s 33% stake on top of the $8.6 billion it’d already paid. Comcast wanted $5 billion more. They agreed on… $439 million. So: Disney won that argument. Comcast is now focused on its NBC-linked Peacock streaming service, which sounds a lot like it has taken its ball and gone home in a huff.
- Home Depot takes a hit: ICE raids on immigrant workers who gather outside Home Depot $HD outlets to offer their labor to contractors and homeowners are putting a dent in the construction supply retailer’s business. Day laborerrs have all but vanished from Home Depot parking lots across the nation, the Wall Street Journal reports. Home Depot’s share price is down 13% in the past six months. High interest rates are also killing new home sales, the biggest source of remodeling, says Morningstar analyst Jaime Katz.
- Coke on ICE: Coca-Cola $KO estimates that Latinos in the U.S. have about $2.1 trillion in spending power, but with the current immigration crackdown that’s hitting even legal residents and Latino U.S. citizens, say retailers, consumer brands, and restaurants. Latinos simply aren’t going out and spending. That’s a big chunk of the 3% drop in Coke’s North American sales in the first quarter, and the Wall Street Journal reports that Colgate-Palmolive $CL, Modelo brewer Constellation Brands $STZ and restaurant chains including Wingstop $WING and El Pollo Loco $LOCO over the past few months have told investors that a decrease in Latino spending is hurting their sales.
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Trumplandia
- About that inflation. So where’s the big consumer price jump that the tariffs are supposed to deliver? With the CPI up only 2.4% in May over the year before (that’s up from 2.3% in April) consumers still aren’t feeling the pinch. Why? A few reasons: 1. Some prices, like housing and energy, have seen slowing demand or oversupply and haven’t been climbing as fast as they had been; 2. Despite the big tariffs, like 50% on imported steel, the overall effective rate on everything the U.S. imports right now is only about 6.7%; 3. Because wherever they could, businesses have been stockpiling imports. Still, the increase could still be coming. The average tariff rate surged from 2.5% at the end of 2024 to 25% in April and it has remained around 14% since mid-May. As E&Y Chief Economist Greg Daco notes, “we should prepare for a muggy summer of price increases,” predicting that CPI inflation will end the year around 3.1%.
- Serbian slip-up: Plans for Jared Kushner and the Trump boys, Eric and Don Jr., to build a Trump-branded luxury hotel in the Serbian capital Belgrade are in jeopardy, after Serbian preservationists said their boss’s decision to allow demolition on the site was illegal. Now the boss is under police investigation, and next up could be the country’s finance minister. The historic landmark that would have to come down is the wreckage of Serbia’s defense ministry headquarters, destroyed by a NATO cruise missile in 1999. Preservationists say the building should be adapted to a community use, and Mr. Kushner’s people told The New York Times that the deal is “under review.”
- Trump’s trade-talk tumble: It looks like China is holding all the cards in the current game of tariffs with President Trump. In the end, China’s control of the rare earths that the U.S. needs to make cars and planes, and even missiles and war jets, has won the day. China relaxed its restrictions on exports of those materials, and the U.S. agreed to roll back limits on exports of U.S. goods and technology, including airplane parts, and agreed not to restrict visas for Chinese students and workers. Still, it’s hard to call this a win. Tariffs on U.S.-China trade remain far above where they were before Trump took office, and making national security related tech exports part of the tariff tit-for-tat for the first time has extracted a “heavy price” from the U.S., former U.S. trade negotiator Wendy Cutler, now with the Asia Society, told the New York Times. “The U.S. has opened the door for China that will be difficult to close,” Cutler said. As for the rest of Trump’s tariffs, an appeals court in Washington said most of Trump’s tariffs could stay in place while it chews things over, even after the U.S. Court of International Trade ruled in May that Trump lacked the authority to impose those same tariffs. Whatever happens, the global economy is in trouble, says the World Bank, which blamed the tariffs for cutting the global growth forecast to 2.3% from a January forecast of 2.7%. Both are below 2024’s 2.8% growth. “Without a swift course correction, the harm to living standards could be deep,” World Bank Chief Economist Indermit Gill wrote. It’s even worse closer to home: The Bank cut its U.S. growth forecast in half, from the 2.8% it recorded for 2024, to 1.4%. More online sellers are blaming the tariffs as they do away with free shipping, seeking to recoup the costs of the import duties, the Wall Street Journal reports. One shipping analyst warned that a lack of free shipping is one of the biggest reasons shoppers abandon an online cart.
- AirBnDOGE? Now that Elon’s left town, who’s gonna keep up DOGE’s chainsawing of the American government? One name that keeps popping up is Joe Gebbia, the AirBnB $ABNB founder and Musk pal who’s been helping lead the ersatz agency. But Gebbia saw all the heat Musk took and wants none of it, the New York Times reports. Instead, there’s talk of a DOGE committee that would include Gebbia and investment banker Anthony Armstrong, who worked on Musk’s deal to buy Twitter. Why not start a sort of politburo model? It’s fascinating.
The Short Stack
- Yale’s PE investments get a failing grade: Hammered by fears of Trump-led cuts to its funding and undersized returns on its investments in private equity, Yale University is looking to sell $6 billion in PE investments in a single deal. Yale was the pioneer of universities investing in high-risk, high-reward private equity, typically bringing in hundreds of millions of dollars to exclusive investments that would yield double-digit annualized payouts when the stakes were sold or the companies went public. But PE and venture capital firms have had a hard time getting out of their investments lately. According to PitchBook, PE returns have dropped from the mid-to-high teen percentage to about 10% from 2022 to 2024.
- Unplugging: Chinese EV battery maker Automotive Energy Supply Group said it is pulling the plug on construction of a $1.6 billion battery plant in South Carolina because of “economic uncertainty arising from current federal policy and tax issues.” The plant would have fed a BMW $BMW.DE factory nearby and employed about 1,600 people in red-state South Carolina. On the other hand, there’s apparently a melted-down nuclear plant in Pennsylvania that could be available for recommissioning (see the lead story, above).
- Boost’s bust? EchoStar $SATS, the owner of Boost Mobile (part of the former Sprint network) and Dish Network pay-TV isn’t spending money fast enough for the liking of Brendan Carr, President Donald Trump’s FCC commissioner, who told the company in May that some of its wireless and satellite spectrum rights are “under review.” EchoStar is considering filing for bankruptcy protection to sort it all out, but an FCC move to take back satellite spectrum could give Elon Musk’s SpaceX an opportunity to buy the spectrum.
- Ad drop: Global ad spending, expected to hit $1 trillion this year, will grow by only 6%, down from a December forecast of 7.7%, ad mega-agency WPP $WPP said, blaming trade restrictions and deglobalization. “If the current trajectory continues,” a WPP official said, “we do expect this to have a chilling effect on global advertising growth over the next five years.”
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Elon’sWorld
- Sorry, not sorry? On Wednesday, Musk tweeted that he “regrets” some of his posts about Trump last week, when he called Trump’s budget bill a “pork-filled” “abomination.” It’s not clear why Musk started walking back his comments — including a deleted tweet that government files on the Jeffrey Epstein sex-trafficking affair mention Trump — but Trump did say the best way to cut government spending was to start with Musk’s multi-billion-dollar SpaceX government contracts. As the late English ournalist A.A. Gill once wrote, “There are, for instance, a dozen inflections of the word sorry. Only one of them means ‘I’m sorry.’”
- Who’s that knocking at the door? The FBI and Homeland Security got so worried about the stream of foreign visitors at Musk’s properties in 2022 and 2023, many from Eastern Europe, that they began tracking the visitors, the Wall Street Journal reports. No charges were pressed, and the current status of the probe isn’t known. Musk has had access to sensitive government information through several of his companies, including SpaceX. In fact, the paper reports that officials at Musk’s AmericaPAC had to do extensive vetting to keep foreigners out of their efforts to support Trump. Musk has been in “regular contact” with Vladimir Putin since 2022, the Journal added.
- An offer they can’t refuse? A number of large companies that once advertised on Twitter, but pulled back as Musk’s antics tanked its audience and left many forms worried about brand safety, have had their arms twisted by X, and are now crying uncle to Musk and CEO Linda Yaccarino. That’s because the X-team has threatened to sue advertisers including Ralph Lauren, Verizon, Amazon and Unilever, for allegedly illegally colluding with one another on an ad boycott, the Wall Street Journal reports. Despite his split with Trump, some advertisers told the Journal they feared Musk could still influence any lawsuit or prosecution.
- Heavenly unrest? Bolivia says it doesn’t want Starlink, and has refused to license the satellite internet provider in the country, despite the Andean nation’s creaky Internet service. Standing his ground for digital sovereignty, Iván Zambrana, director of the Bolivian Space Agency, told The New York Times, “it would be suicide to let them in without regulation.” He said Starlink’s technological edge would let it dominate the market, pushing out local operators. Meanwhile, United Airlines $UAL hit a big 404 with Starlink, turning satellite WiFi off for its passengers because of static interference. It said flight safety is not in danger.
- Are robotaxis really coming? In the latest promise from Tesla, Musk says self-driving Tesla $TSLA taxis wil “tentatively” start offering rides in Austin on June 22. Musk has staked Tesla’s future on self-driving vehicles, dropping plans to build a cheaper EV platform, and much of the company’s valuation hangs on that vision, Reuters reports. But, Musk said, the date could shift. “We are being super paranoid about safety,” he posted on X.
Peter S. Green is a veteran reporter and editor who has spent more than two decades covering business and finance from Eastern Europe to New York City, and has worked for Bloomberg News, The New York Post, The New York Times and The Messenger. He lives in New York City and is always looking for the next big story.
