AI data centers will need four times the power they use today. That’s not a projection from some optimistic research note — Morgan Stanley Research is forecasting U.S. data center power demand could reach 74 gigawatts by 2028, with a projected shortfall of roughly 49 gigawatts in available power access. Supply simply cannot keep up with what the hyperscalers are building.

Which brings us to Talen Energy (NASDAQ: TLN).

Most investors in this space went straight for the obvious names. Constellation Energy gets the most airtime. NuScale and Oklo got the speculative excitement. But Talen — a Houston-based independent power producer most people couldn’t have named 18 months ago — has been doing something remarkably specific: locking in multi-decade contracts with cloud giants and building what may be the most strategically irreplaceable energy infrastructure position in the PJM Interconnection grid.

The AWS Deal Changes Everything

The crown jewel here is Talen’s Susquehanna nuclear plant in Pennsylvania. Amazon Web Services signed a landmark agreement with Talen to receive 1,920 megawatts of carbon-free nuclear power from Susquehanna through 2042 — a 17-year contract expected to generate approximately $18 billion in revenue. That’s a level of cash flow visibility that’s essentially unheard of for an independent power producer.

Think about what that means structurally. Talen isn’t selling into volatile wholesale power markets anymore. It’s an infrastructure provider for cloud computing. The business model has fundamentally changed — and the valuation hasn’t fully caught up.

In March 2026, Talen signed a Letter of Intent with X-energy to evaluate deploying gigawatt-scale Xe-100 small modular reactors across Pennsylvania and the PJM market. That’s not just an existing-asset story anymore. The company is actively planning the next chapter.

What the Numbers Look Like

• 2026 Adjusted EBITDA guidance: $1.75B–$2.05B
• 2026 Adjusted Free Cash Flow guidance: $980M–$1.18B
• Total generation assets: 13.1 GW, including 2.2 GW of nuclear
• PJM capacity auction (2027/2028): Cleared 8,745 MW at $333.44/MW-day — approximately $1.067 billion in contracted capacity revenue
• Analyst consensus: Buy, with a 12-month median price target of roughly $504

The company also just priced a $4 billion senior notes offering to fund a previously announced 2,451 MW gas generation acquisition — adding further capacity to serve the data center buildout. Management is targeting net leverage below 3.5x by year-end.

The Policy Tailwind

President Trump has issued four executive orders aimed at modernizing nuclear regulatory frameworks and expediting reactor approvals. The Federal Energy Regulatory Commission reported that U.S. data center electricity demand is expected to climb from 19 gigawatts in 2023 to 35 gigawatts by 2030. Nuclear — always-on, carbon-free, high-capacity — sits at the center of every serious solution to that gap.

The part people skip: Talen isn’t waiting for next-generation reactors to power this story. It’s operating plants, clearing PJM capacity auctions, and signing long-term contracts right now. The earnings power is real and growing.

Risks Worth Watching

This isn’t a clean story without complications. Talen carries meaningful debt post-acquisition. Reliance on PJM capacity markets introduces regulatory risk — and the FERC has already shown it can complicate data center power deals. Integration of new gas assets takes execution. And the Susquehanna plant is a concentrated bet; if that asset runs into operational issues, the cash flow profile changes materially.

Morgan Stanley raised its price target on TLN to $479 in April. Barclays trimmed theirs slightly to $408. The spread between analyst estimates is unusually wide, which tells you something: this is a stock where the range of outcomes is genuinely wide, not one where everyone’s converged on the same number.

What I keep coming back to is this — the AI power shortage is structural, it’s accelerating, and the companies with locked-in, long-dated supply contracts for carbon-free baseload power are in a category of their own. Talen is one of a very small number of companies that qualifies. Worth a closer look before Q1 results drop on May 5.