Nuclear Energy Stocks Surge Amid AI-Driven Power Demand: A New Dawn for the Sector?

This week, nuclear energy stocks soared to record highs, fuelled by landmark deals between Amazon, Google, and small modular reactor (SMR) developers. The surge underscores the growing role of nuclear power in meeting the massive energy demands driven by the AI and data centre boom, a pivotal moment for the energy sector.

The Nuclear Renaissance

Shares of SMR developers such as Oklo Inc and NuScale Power surged by 99% and 37%, respectively, after Amazon and Google announced their plans to invest in nuclear-powered data centres. These investments aim to address the skyrocketing power consumption required by AI operations, which traditional renewable sources like wind and solar may struggle to supply reliably. Nuclear’s stable baseload power positions it as a critical asset in decarbonising the grid while meeting energy demands.

The nuclear energy revival also extends to conventional players. Constellation Energy, which operates the largest fleet of reactors in the U.S., saw its shares double this year. The company recently signed a 20-year deal with Microsoft, leading to the reopening of the Three Mile Island plant. Meanwhile, uranium producer Cameco saw a 38% surge, and BWX Technologies, which supplies nuclear components, climbed 65%. The momentum is clear: nuclear energy, particularly SMRs, is rapidly gaining traction.

SMRs: The Game Changer for AI?

The tech industry’s reliance on artificial intelligence has shifted the narrative around nuclear power. As AI data centres proliferate, so too does the demand for stable, clean energy. In the first half of 2024 alone, new data centres totalling nearly 24 gigawatts were announced—triple the previous year’s figure. Nuclear energy, especially SMRs, is positioned to meet this explosive demand.

SMRs offer smaller, safer, and more efficient alternatives to traditional nuclear reactors. Despite past setbacks, such as cost overruns and regulatory hurdles, the investment from tech giants like Amazon and Google could prove to be the catalyst needed for large-scale SMR deployment.

MY ANALYSIS

The resurgence in nuclear energy stocks, driven by the AI boom, represents both an opportunity and a cautionary tale for investors. While Amazon and Google’s SMR investments are transformative, signalling strong demand for stable, low-carbon power, the sector’s history of cost overruns and regulatory hurdles cannot be ignored.

In my view, tech companies' involvement could mitigate some of these challenges by providing the financial stability and scale necessary for SMR deployment. However, investors must remain wary of overvaluation risks given the long timelines and unproven commercial viability of many SMR technologies. The real key to success lies in the effective execution of these ambitious projects. Should delays and budget overruns persist, enthusiasm could wane. Yet, if successful, SMRs could revolutionise both the energy and technology sectors, positioning nuclear as a critical enabler of the AI era. For those with a long-term horizon, the nuclear energy sector offers significant growth potential, but only if they can navigate the inherent risks with diligence.

Conclusion

The nuclear energy sector is undergoing a revival, largely driven by the power needs of the AI industry. As major tech players like Amazon and Google invest heavily in SMR technology, the industry may finally overcome the barriers that have plagued it for decades. Investors who recognise the transformative potential of nuclear power, particularly in the AI context, could be well-positioned for long-term gains. However, the inherent risks remain significant, making careful analysis and due diligence crucial for those looking to capitalise on this trend.