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Nuclear power is poised for a renaissance in the United States, driven by big tech’s seemingly insatiable need for electricity to power AI-generating data centers.
Three recent headlines have highlighted this point: Microsoft (MSFT) signed an agreement with Constellation Energy (CEG) to restart a reactor at Three Mile Island. Google (GOOG, GOOGLE) in partnership with Kairos to buy electricity from small modular nuclear reactors, called SMRs. And Amazon (AMZN) leads $500 million funding round for another SMR company, X-Energy.
The nuclear power industry has largely stagnated in the United States. While the country has 94 nuclear reactors, according to the Energy Information Administrationtheir collective generating capacity has remained around 20% of total electricity since the late 1980s. When the Vogtle plant in Georgia opened its third and fourth reactors earlier this year, they were the first new units for seven years. One of the main reasons for this slowness is the strict safety and design standards imposed by regulators.
If Big Tech investments are any indication, that could be about to change. Chips and energy are the drivers of the AI movement, which makes reexamining nuclear power a logical conclusion. But if investors want to move on with their money, there are a few key points to remember.
The first is that these projects — even the Three Mile Island reactor, which doesn’t use new technology — are years away. Three Mile Island is expected to come online by 2028.
Then there’s the latest technology. The goal of small modular reactors is to create mini versions of larger nuclear fission generators at lower cost and with more flexibility, Kairos CEO Mike Laufer told Yahoo Finance.
But SMRs are not yet used in the United States. All companies benefiting from investments are at the experimental stage. The private company Kairos, for example, received government approval to build a demonstration unit. He will first run it with non-nuclear power to showcase his cooling technology, which Laufer says has safety benefits. This demo is planned for 2030.
The second hurdle for investors is that there aren’t many ways to get into the stock market, especially pure play stocks. Many of these stocks have soared this year. NuScale Power (RMS) soared more than 450%. Oklo (OKLO), backed by OpenAI’s Sam Altman, went public via a SPAC in May and shares have gained more than 80% since.
The overall demand for electricity expected from data centers has also driven utility company stocks to almost unprecedented levels, and it’s not exclusive to nuclear. Their prices are regulated, so the bet depends on the expected expansion of the volume of demand. (THE ETF that tracks S&P 500 utility companies has risen nearly 30% this year, which, if sustained, will be a record gain.)
Uranium producers have been another outlet for thirsty cash seeking nuclear-related investments. Based in Vancouver Uranium energy (CUE) and Cameco (CCJ), for example, have been on a tear for years and are near record levels.
All of this assumes that SMRs are approved and functioning. Clearly, more and more money is being invested in this direction, with big tech motivated to produce electricity from clean energy.
“Right now, these things haven’t been proven,” George Gianarikas, an analyst at Canaccord Genuity who covers renewable energy, said in a phone interview. “We don’t have many examples of small modular reactors operating in the world. It’s a promise.
Julie Hyman is the co-host of Market dominance on Yahoo Finance. You can find her on social media @juleshyman.
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