July 8 (Reuters) - Nuclear power companies Constellation

Energy ( CEG ) and Vistra ( VST ) have become the top S&P 500

performers after Super Micro and Nvidia, as investors look

beyond semiconductors and bet on firms catering to an artificial

intelligence boom in any capacity.

Shares of Vistra ( VST ) have jumped 132% this year, and those of

Constellation Energy ( CEG ) climbed 81%, compared with a 16.7% rise in

the benchmark S&P 500, as rising demand for power from

data centers, manufacturers and electric vehicle makers creates

a need for clean and sustainable supply of energy.

"Long-only" investors and hedge fund exposure to the sector

are at record highs, Band of America said in a note in June.

More than 20% of large cap funds own at least Vistra ( VST ) or

Constellation's stock compared to just 13% at the beginning of

the year, BofA said.

"You'd want to be levered to the clean energy theme and

anything that's related to data center demand," within the

sector, said Adam Turnquist, chief technical strategist for LPL

Financial.

Nuclear energy companies such as Constellation and Vistra ( VST )

are particularly expected to benefit from the U.S. government's

push for big tech firms to invest in new climate-friendly energy

generation to cater to surging AI power needs.

Joseph Dominguez, chief executive officer of the largest

operator of U.S. nuclear plants Constellation Energy ( CEG ), said in

May "the data economy and Constellation's nuclear energy go

together like peanut butter and jelly."

Analysts believe the unregulated utilities, which allow more

competition, could also enter long-term contracts with AI data

centers, similar to the one signed between Talen Energy ( TLNE )

and Amazon Web Services (AWS) earlier this year, which

would improve their margins and cash flow.

The Talen-AWS deal has "helped drive higher expectations for

Constellation and Vistra ( VST ) which also have nuclear facilities that

are well positioned to execute a similar transaction," said

James Thalacker, managing director at BMO Capital Markets.

VALUATION

Bets that the 10-year U.S. Treasury yields have

peaked are supportive of the dividend-paying utilities sector

that competes with fixed income for capital.

However, the valuations of some unregulated utilities are

trading above the industry average. Constellation trades 25

times its 12-month forward earnings estimates compared with S&P

500 utilities sector's 16.5 multiple, LSEG data showed.

"The valuation premium is justified by the quantum increase

in profits that these companies will capture on the back of

tighter supply-demand," said Michel Sznajer, portfolio manager

at Ecofin.

Until May, utilities was among the best performing S&P

sectors but has since pared some gains.

Nicholas Colas, co-founder of DataTrek Research, said

investors' "backdoor play on artificial intelligence ... seems

to have fizzled, at least for the moment."

"Utilities sector is a reasonable place to put capital for a

decent long run total return, but we'll stick to tech stocks as

a more direct way to profit from AI," Colas said.