The world is having a “nuclear renaissance,” according to Morgan Stanley, and the opportunity for investors is ample. 

The pace of nuclear capacity expansion has only increased since last year, according to the firm's analysts. Morgan Stanley now expects investment in nuclear energy to total $2.2 trillion through 2050, up from last year’s forecast of $1.5 trillion.

Morgan Stanley divides nuclear-exposed stocks into three categories: power generators, uranium miners, and equipment and plant providers. The firm’s three favorite U.S. stocks to play the nuclear theme all fall into the first category: Talen Energy (TLN), Public Service Enterprise Group (PEG), and Vistra (VST). 

“The dual imperatives of decarbonization and energy security, combined with a gradual decline in investor exclusions and more favorable financing conditions, are making the nuclear renaissance a truly global investment theme,” wrote Morgan Stanley analysts on Tuesday. 

President Donald Trump has made energy security a central theme of his second term. In May, Trump set the goal of growing America’s nuclear energy capacity to 400 gigawatts in 2050 from about 100GW today. The president signed several executive orders aiming to expedite the expansion and construction of U.S. nuclear capacity.

Investors around the world have become more open to nuclear energy. As of December 2024, Morgan Stanley wrote, 2.3% of global [assets under management] were subject to an exclusion policy regarding nuclear power—less than for alcohol, military contracting or gambling.

And The World Bank recently lifted its ban on financing nuclear power projects, which the firm said could set the stage for other international lenders to follow.

Artificial intelligence is one of the core reasons Morgan Stanley’s preferred U.S. nuclear stocks—Talen, Vistra, and Public Service Enterprise Group—are all power generators. 

Artificial intelligence consumes a lot of energy, and nuclear power offers AI companies stable prices, reliability, and efficiency. Morgan Stanley said it believes the market currently underappreciates these long-term benefits, but tech giants don’t.

“Hyperscalers are increasingly willing to pay a premium for nuclear power,” the analysts wrote. In the last year, Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOG), and Meta Platforms (META) all have struck deals with nuclear power providers like Constellation Energy Group (CEG) and Talen. Morgan Stanley estimates the hyperscalers have agreed to pay premiums ranging from $30-$50 per megawatt-hour, and would be willing to fork over a $70/MWh premium for a nuclear plant collocated with a data center. 

New nuclear deals could be a catalyst for two of Morgan Stanley’s top picks. It expects to hear about deals regarding facilities operated by Vistra and PEG, stocks on which it holds "overweight" ratings, soon, the analysts said.

Talen already has contracted out most of its nuclear capacity to Amazon Web Services, according to Morgan Stanley's David Arcaro, “so we don’t expect new nuclear announcements going forward.” But he broadly sees AI demand and limited capacity pushing nuclear power prices higher, boosting the earnings of Talen, Vistra, and PEG.