Who benefits the most from AI computing power detonating electricity demand in the US? Mizuho named Vistra (VST.US) and Talen (TLN.US)

The Zhitong Finance App learned that Mizuho covered Vistra Energy (VST.US) and Talen Energy (TLN.US) for the first time, both rated “outperforming the market”, with target prices of $169 and $405, respectively.

Mizuho analyst Anthony Crowdell said he believes Vistra is one of the largest and most strategically positioned commercial power platforms, and can seize the monetization opportunities brought about by the structural jump in US electricity demand driven by artificial intelligence (AI) and data center construction.

Crowdell pointed out that Vistra continues to expand its power generation asset portfolio and recently added 5.5 gigawatts (GW) power generation facilities through the acquisition of Cogentrix, covering ERCOT, PJM, and ISO-New England regions. He predicts that Vistra's free cash flow yield will increase from about 8% in 2025 to about 13% in 2028, reflecting the company's accurate market positioning to fully benefit from the upward trend in the latter part of the forward electricity price curve, thereby accelerating the release of cash return potential.

Analysts said that considering that adjusted free cash flow is expected to grow at a 5-year compound annual rate of 10%, Vistra's current valuation is a very attractive entry point.

Crowdell said his positive outlook for Talen Energy stems from the company's differentiated layout in the ever-tightening PJM electricity market.

He pointed out that 98% of Talen's power generation assets are located in the PJM market, enabling it to benefit from the trend of a widening gap between supply and demand, which has driven the latest capacity auction price to rise from $29 per megawatt-day in 2024-25 to the current upper limit of around $330 per megawatt-day. Crowdell predicts Talen's adjusted free cash flow return will reach 14% in 2028.

Analysts also mentioned that Talen's Susquehanna nuclear power plant provided scarce power generation resources and secured contract cash flow through a power purchase agreement with Amazon; in addition, the Cornerstone acquisition completed in June this year added three additional natural gas power plants to Talen in the PJM market, increasing the total installed capacity by 2.6 gigawatts.

By the close of the US stock market on Monday, Vistra was down 0.4% to close at $135.66, down nearly 16% so far this year; Talen fell 2.84% to close at $305.535, down more than 18% so far this year.