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Constellation Energy agreed to buy Calpine for $16.4 billion, combining two of the country’s largest electricity generators at a time when their product is in high demand from tech companies.

Including the assumption of debt, Constellation on Friday valued the cash-and-stock deal for the privately held Calpine at $26.6 billion.

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The value of power generators has soared in the past year due in large part to artificial intelligence. Tech companies are adding new data centers amid a boom in demand for AI computing, and those facilities require massive amounts of electricity.

Constellation is the largest producer of nuclear power in the U.S., and Calpine is one of the largest generators of electricity from natural gas and geothermal sources. News of a potential deal between the two companies broke on Wednesday.

Many of Calpine’s power plants are in Texas and California, giving Constellation a larger foothold in two of the U.S.’s most electricity-hungry states, in addition to expanding along the East Coast.

Key for Constellation was gaining a larger slice of the Texas market, where electricity demand is expected to grow at one of the fastest rates, said Joe Dominguez, chief executive of Constellation Energy.

“It’s a big part of the growth story for many of our existing [business] customers,” Dominguez said. “I don’t think AI is going to be one place or another. It’s going to be everywhere, but it’s certainly going to have a big presence in Texas.”

On Friday, Constellation shares jumped 25% to $305.19, the stock’s highest-ever closing price.

The company now has a market value of more than $95 billion. The stock has risen 163% over the past 12 months. Shares of power producers such as NRG Energy and Vistra have also soared in the past year alongside forecasts for rising power demand.

Private-equity firm Energy Capital Partners and a group of co-investors agreed to take Calpine private in 2017, paying $5.6 billion in cash. Including debt, that deal’s value was $17 billion. Energy Capital Partners and other large investors have agreed to not sell their Constellation shares for 18 months, according to Constellation.

A search on a generative AI platform such as ChatGPT can use 10 times the amount of energy as a google search. Data centers could use as much as 9% of U.S. electricity by 2030, roughly doubling their current consumption, according to the Electric Power Research Institute.

Constellation’s nuclear plants have made it an attractive partner for customers that want both reliable and low-carbon electricity, a combination that is in short supply in the U.S. Resources such as wind and solar avoid carbon emissions but can’t produce round-the-clock electricity, while natural-gas plants are reliable but have an environmental footprint that some users want to avoid.

Last week, Constellation and the General Services Administration agreed to a 10-year, $840 million deal to provide power to many federal agencies. Some of that power would come from Constellation’s plans to increase output at existing nuclear plants, called “uprates.”

In September, Constellation and Microsoft said the tech giant had signed a 20-year power-purchase agreement to pair its data centers with round-the-clock clean power from the undamaged reactor at Three Mile Island, the site of the country’s biggest civilian nuclear power accident.

Constellation expects to spend around $1.6 billion on the effort to restart a reactor already undergoing decommissioning.

Dominguez said Calpine’s gas plants, though carbon-emitting, are relatively young and fit in with Constellation’s belief that reliable and dispatchable power is increasingly needed. Calpine is also further down the road with technologies such as carbon capture and storage than Constellation, Dominguez said.

“Nuclear is a key part of the path forward, but the reality for us is that our customers are going to need more power than our reactors by themselves are going to be able to provide,” Dominguez said.

Write to Jennifer Hiller at jennifer.hiller@wsj.com

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