Why is Drax stock gaining today?

Drax stock is trading higher today, up 0.9% to 870.46p, as investors react to a significant AI data centre partnership recently announced. The collaboration, forged with Brookfield Asset Management and Radiant, aims to develop a data centre exceeding 1 gigawatt at the Drax Power Station site in northern England. This news sparked an initial surge of over 8% on Tuesday and continues to fuel buying interest today.

JPMorgan analysts have welcomed the deal, suggesting it could enhance the valuation of Drax's data centre ambitions and increase confidence that the power station will remain in operation beyond the expiry of its biomass subsidy scheme in March 2031. While Citi took a more cautious stance, noting the lack of a final investment decision and limited financial details, the overall market sentiment remains positive.

The deal's first phase targets up to 100 megawatts of compute capacity, with an initial £2.5 billion commitment, and commercial operations expected to begin early 2028. The FTSE 100 has also seen a modest rise, bolstered by falling bond yields following Democratic gains in the US midterm elections. This has been interpreted as a reduction in the likelihood of further deficit-expanding fiscal policy.

Despite the mixed market backdrop and expectations of a Bank of England interest rate increase, Drax's stock has outperformed the broader UK market, driven by the genuinely transformative corporate announcement, positive analyst commentary, and a supportive macro environment. The stock remains below its 52-week high of 937.5p but has significantly recovered from its 52-week low of 702p, with the Brookfield partnership offering a credible new growth narrative centered on the UK's rapidly expanding AI infrastructure needs.