AI computing power ignites demand for American Electric Power Company, Inc. Who benefits the most? Mizuho names Vistra (VST.US) and Talen (TLN.US).

Mizuho has initiated coverage of Vistra Energy (VST.US) and Talen Energy (TLN.US), both with an "Outperform" rating, setting target prices of $169 and $405, respectively. Mizuho analyst Anthony Crowdell stated that he believes Vistra is one of the largest and strategically positioned commercial power platforms capable of capitalizing on monetization opportunities arising from a structural leap in demand for American Electric Power Company, Inc. driven by artificial intelligence (AI) and data center construction. Crowdell noted that Vistra continues to expand its generation asset portfolio, having recently added 5.5 gigawatts (GW) of generation capacity through the acquisition of Cogentrix, covering the ERCOT, PJM, and ISO-New England regions. He predicts that Vistra's free cash flow yield will increase from about 8% in 2025 to approximately 13% in 2028, reflecting the company's ability to fully benefit from the upward trend in the forward electricity price curve due to precise market positioning, thereby accelerating the release of cash return potential. The analyst mentioned that considering the adjusted free cash flow's five-year compound annual growth rate is expected to reach 10%, Vistra's current valuation represents a highly attractive entry point. Crowdell's positive outlook on Talen Energy stems from the company's differentiated positioning in the tightening PJM power market. He pointed out that 98% of Talen's generation assets are located in the PJM market, allowing it to benefit from the expanding supply-demand gap, which has driven the latest capacity auction price from $29/MW-day for 2024-25 to the current limit of around $330/MW-day. Crowdell predicts that Talen's adjusted free cash flow yield will reach 14% by 2028. The analyst also mentioned that the Susquehanna nuclear power plant under Talen provides scarce generation resources and has secured contracted cash flows through a power purchase agreement with Amazon.com, Inc.; additionally, the Cornerstone acquisition completed in June of this year has added three natural gas power plants to Talen's portfolio in the PJM market, increasing installed capacity by a total of 2.6 GW. As of Monday's market close, Vistra was down 0.4%, closing at $135.66, and has dropped nearly 16% year-to-date; Talen fell 2.84%, closing at $305.53, with a year-to-date decline of over 18%.