Government rejection of Amazon agreement casts uncertainty on tech partnerships with power companies for AI.

• The Amazon data center campus request to increase the power dispatch from the Susquehanna nuclear plant was rejected by the Federal Energy Regulatory Commission.
• This agreement is a unique first-of-its-kind deal that could set a precedent for other power and tech companies.
• Talen Energy, Constellation Energy, and Vistra Corp. fell on the news.

The rejection of a request to increase power for an Amazon data center by a federal regulator posed a significant obstacle to technology companies' efforts to directly power artificial intelligence with nuclear plants.

On Friday, the Federal Energy Regulatory Commission denied a request to increase the power dispatch capacity of the Susquehanna nuclear plant in Pennsylvania to an Amazon data center campus.

In March, Amazon purchased a data center campus from an independent power producer for $650 million, marking a unique agreement where the nuclear plant would power the campus.

Talen's stock dropped more than 9% in premarket trading after FERC denied its merger with Exelon. Additionally, Constellation and Vistra's stocks tumbled nearly 8% and more than 3%, respectively, in sympathy. Investors had anticipated that these companies would also announce similar deals at some point.

The Amazon data center has requested an increase in power dispatched from the PJM Interconnection and Susquehanna plant, owned by Talen, from 300 megawatts to 480 megawatts.

FERC Commissioner Mark Christie stated that the arrangement known as co-location in the power industry could result in significant consequences for both grid stability and consumer expenses, as he supported the order.

FERC's decision will have a "chilling effect on economic development in states such as Pennsylvania, Ohio, and New Jersey," said Talen on Monday. The power company is currently evaluating its options with a "focus on commercial solutions."

The Susquehanna nuclear plant can still provide 300 megawatts of power to the Amazon data center campus, as deemed "just and reasonable" by Talen, in the interest of consumers.

Despite the FERC decision, Constellation remains committed to restarting the Three Mile Island nuclear plant in 2028 through a power purchase agreement with a third party. Instead of directly powering Microsoft's data centers, Three Mile Island will dispatch power to the electric grid.

Tech companies similar to Amazon have attracted interest from Constellation and Vistra for potential deals, as expressed by both parties.

Growing amounts of electricity are being consumed by data centers that power AI and cloud computing, causing utilities to struggle to meet the increasing electric demand. In response, tech companies are increasingly turning to nuclear power as a reliable and carbon-free energy source.

This year, two of the top-performing stocks in the S&P500 are Vistra and Constellation, as investors anticipate profits from the tech sector's increasing energy demands.

This year, Vistra's stock has more than tripled, surpassing even the best performing stock in the market. Meanwhile, Constellation has more than doubled and is the fourth best stock in the S&P500.