Forget Tech Stocks and Buy This Energy Stock That's Fueling the AI Boom

Core Viewpoint - The article suggests that while energy companies may benefit from the AI boom, not all are equally positioned, highlighting Constellation Energy's overvaluation compared to Devon Energy's stronger fundamentals. Group 1: Constellation Energy (CEG) - CEG is currently trading at 41 times trailing earnings with a market cap of approximately $109 billion, despite a 38% year-over-year decline in net income to $2.3 billion [2][3] - The stock has seen an 18% decline year-to-date from its January peak, indicating a crowded trade that is losing value before fundamentals align with market hype [3] - CEG's recent quarterly revenue showed a 13% increase from the prior year, but this growth does not justify its high valuation multiple [3] Group 2: Devon Energy (DVN) - Devon Energy has signed a 7-year gas supply agreement to deliver 65 million cubic feet per day to a proposed 1,350 MW power plant, directly linked to AI-driven electricity demand, effective in 2028 [5] - The company has also secured a 10-year LNG export contract for 50 million cubic feet per day, also effective in 2028, providing more stable cash flows compared to CEG's speculative future [6] - Devon generated $3.1 billion in free cash flow in 2025, significantly higher than CEG's $2.3 billion net income, highlighting a more favorable financial position with a market cap of roughly $28.7 billion [11] - Devon's capital expenditures were reduced to $3.6 billion in 2025 while oil production grew to 390,000 barrels per day in Q4, exceeding guidance [11] - Devon trades at 11 times trailing earnings, significantly lower than CEG's 41 times, indicating a more attractive valuation for investors [13] Group 3: Merger and Shareholder Returns - Devon announced an all-stock merger with Coterra Energy, expected to close in Q2 2026, with Devon shareholders retaining approximately 54% of the combined entity and targeting $1 billion in annual pre-tax synergies [8] - Upon merger completion, Devon's quarterly dividend is set to increase by 31% to $0.315 per share, alongside a new share repurchase authorization exceeding $5 billion [8] - In contrast, CEG investors are awaiting a guidance call and a promised 10% dividend increase on a quarterly payout of $0.4265, indicating less immediate shareholder return events [8]