Constellation Energy's valuation stumbles while Devon Energy quietly thrives

One energy giant rides AI hype with shaky results—another builds real growth through oil deals and dividends. Who's the smarter bet?

, and Administrator

2026 March 18 . 7:11 AM

2 min read

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Constellation Energy's valuation stumbles while Devon Energy quietly thrives

Two energy companies are drawing attention for very different reasons. Constellation Energy (CEG), a Wall Street favourite tied to AI-driven demand, faces doubts over its steep valuation. Meanwhile, Devon Energy (DVN) is strengthening its position with major deals, rising production, and strong cash flow—yet remains under the radar for many investors.

The contrast between the two highlights shifting priorities in the energy sector, where fundamentals and future bets are clashing.

Constellation Energy has been a top pick among investors betting on nuclear power to support AI data centres. The company's Q4 revenue rose 13% from the same period last year, but that growth has not matched its sky-high valuation. Currently trading at 41 times trailing earnings, CEG holds a market cap of around $109 billion—despite a 38% drop in full-year net income to $2.3 billion. Its stock has already fallen 18% from January's peak, suggesting enthusiasm may be fading before the business can prove its worth.

Devon Energy, on the other hand, is quietly building a stronger case. The company's oil production has more than doubled since 2020, climbing from roughly 318,000 barrels per day to over 700,000 in 2025. This surge came from acquisitions like the Williston Basin purchase, efficiency gains in the Permian and Delaware Basins, and better technology. Higher oil prices and optimised drilling have also played a key role.

DVN's financial health looks solid, with $3.1 billion in free cash flow for 2025—a sharp increase from the previous year. Its market cap sits at about $28.7 billion, making it a more grounded investment compared to CEG. The company has also secured long-term deals to lock in future revenue. A 10-year LNG export contract for 50 million cubic feet per day starts in 2028, while a separate 7-year agreement will supply 65 million cubic feet daily to a 1,350 MW power plant tied to AI electricity demand.

Further strengthening its position, DVN announced an all-stock merger with Coterra Energy (CTRA), expected to close in Q2 2026. Devon shareholders will hold around 54% of the combined company. Once finalised, the merger will bring a 31% dividend increase to $0.315 per share and a new $5 billion share buyback programme.

While CEG struggles with inflated expectations, DVN's steady growth and concrete contracts are winning over analysts—even if mainstream coverage remains limited.

CEG's stock decline and high valuation raise questions about whether its AI-driven growth story can deliver. DVN, however, is moving forward with locked-in contracts, rising production, and a merger set to boost shareholder returns. The difference between the two companies underscores how energy investments are now being weighed: speculative potential versus proven performance.