The Nuclear Renaissance: Big Tech's Electricity Demand Fuels a Resurgence in Nuclear Power

The nuclear energy industry in the United States has long been stagnant, with the country's 94 nuclear reactors maintaining a collective generating capacity of around 20% of total electricity since the late 1980s. However, a recent surge of investment and activity from major tech companies has sparked a potential renaissance in nuclear power, driven by the insatiable need for electricity to power AI-generating data centers.

Powering the Future: Big Tech's Embrace of Nuclear Energy

Reviving the Past, Embracing the Future

Microsoft has signed an agreement with Constellation Energy to restart a reactor at the Three Mile Island nuclear power plant, which was the site of a major accident in 1979. This move, along with Google's partnership with Kairos to purchase power from small modular nuclear reactors (SMRs) and Amazon's $500 million funding round for SMR company X-Energy, suggests that Big Tech is betting big on nuclear power as a solution to its growing energy demands.

The nuclear energy industry has long faced challenges, including stringent safety and design standards imposed by regulators, which have contributed to the slow pace of new reactor construction. However, the recent investments from tech giants indicate a shift in the industry's outlook. As chips and energy become the "picks and shovels" of the AI movement, the reexamination of nuclear power as a viable energy source has become a logical conclusion for these tech leaders.

The Promise of Small Modular Reactors

Small modular reactors (SMRs) have emerged as a potential game-changer in the nuclear energy landscape. These mini versions of larger nuclear fission generators aim to offer a lower-cost and more flexible alternative to traditional nuclear power plants. Companies like Kairos, which has received government approval to build a demonstration unit, are at the forefront of this technology.

However, the path to widespread adoption of SMRs is not without its challenges. These reactors are still in the experimental stages, and there are no examples of them being used commercially in the United States. Kairos, for instance, plans to first run its demonstration unit with non-nuclear power to showcase its cooling technology, which it claims has safety benefits. This demonstration is targeted for 2030, underscoring the long timeline for these projects to come to fruition.

Investing in the Nuclear Renaissance

For investors looking to capitalize on the potential nuclear renaissance, the options are limited, especially when it comes to pure-play opportunities. Many of the stocks related to nuclear energy have already seen significant gains this year, with NuScale Power (SMR) soaring by more than 450% and Oklo (OKLO), backed by Sam Altman of OpenAI, gaining over 80% since its SPAC debut in May.

The increased demand for electricity from data centers has also driven up the shares of utility companies, not just those focused on nuclear power. The ETF that tracks the S&P 500 utility companies has risen by nearly 30% this year, a record-breaking performance. Uranium producers, such as Vancouver-based Uranium Energy (UEC) and Cameco (CCJ), have also been a popular investment outlet for those seeking exposure to the nuclear industry.

Navigating the Risks and Uncertainties

While the investments from Big Tech have sparked renewed interest in nuclear power, it's important to remember that these projects are still years away from fruition. The Three Mile Island reactor, for example, is not using new technology but is still scheduled to come online by 2028.

Furthermore, the success of SMRs is not guaranteed. As George Gianarikas, an analyst at Canaccord Genuity who covers renewable energy, noted, "Right now, these things are unproven. We don't have a lot of examples of small modular reactors working in the world. They're a promise."

Investors and industry observers will need to closely monitor the progress of these nuclear projects, as well as the regulatory landscape and public sentiment surrounding nuclear power, to determine the true potential of this resurgence. The road ahead may be long and uncertain, but the investments from tech giants suggest that the nuclear industry may be on the cusp of a transformative era.