Electricity demand is on the rise globally thanks to electrification, adoption of electric vehicles, wider use of air conditioning, and the rise of AI-related data centers. In the U.S., data centers are expected to drive roughly half of the overall increase in power demand to 2030, according to the International Energy Agency (IEA). In base case projections, the IEA expects U.S. data center power consumption to increase by 130% from 2024 to 2030.
For context, a typical hyperscale AI data center uses the same amount of electricity annually as 100,000 homes according to the IEA. The energy consumption of large data centers can equate to millions of homes or major U.S. cities.
Securing reliable power is a key gating factor in data center development. While renewables and natural gas have a role to play, nuclear stands apart for its reliability and carbon-free power generation. Nuclear’s clean qualities are particularly attractive as tech companies strive to reach environmental goals. In the near term, hyperscalers are contracting with existing nuclear facilities. For more distant power needs (2030+), they are partnering with companies developing advanced nuclear or small modular reactors.
Hyperscalers sign power purchase agreements with existing nuclear plants.
Both Meta (META) and Microsoft (MSFT) have signed 20-year power purchase agreements (PPA) with Constellation Energy (CEG) for nuclear power. Meta is purchasing power from the Clinton Clean Energy Center in Illinois starting in June 2027.
Microsoft’s PPA will support the reopening of Three Mile Island Unit 1 in Pennsylvania, which closed for economic reasons in 2019 and has been renamed the Crane Clean Energy Center. Before its closure, Unit 1 was generating 837 megawatts (MW), which could power 800,000 homes. Originally, Crane was expected to come back online in 2028, but with significant progress, the restart has been pulled forward to 2027. Though not as far along, NextEra Energy (NEE)’s Duane Arnold nuclear plant in Iowa is similarly looking to restart, with a view to meeting data center power demand.
In late September, Vistra Energy (VST) announced a 20-year PPA with an investment-grade customer for its operating Comanche Peak nuclear facility in Texas. To be clear, the buyer was not named. Comanche Peak is authorized to operate through 2053.
Talen Energy’s (TLN) Susquehanna nuclear plant in Pennsylvania provides power to a co-located Amazon Web Services data center. In June, TLN announced a new PPA with Amazon Web Services for 1,920 MW through 2042, with the ability to extend. TLN and Amazon plan to also explore small modular reactors (SMRs) in Pennsylvania.
SMRs earlier stage but garnering robust interest.
SMRs are generally defined as nuclear reactors that can generate up to 300 MW of power. Modular implies that multiple reactors can be produced in a factory and shipped to where they are needed. Serial production should lead to more efficiencies and lower costs over time.
SMRs could operate on their own or alongside multiple units to meet greater power needs. Their smaller footprint, shorter build time, and relatively lower cost tends to be appealing. SMRs could also be deployed at retired coal plants. Finally, SMRs tend to have better safety features based on passive systems or natural phenomena, instead of needing to rely on pumps or backup generators to cool the core in an emergency.
The appeal of SMRs is clear, with many versions in design around the world. But they are generally expected to be online in 2030+. In August, Google, Kairos Power, and the Tennessee Valley Authority announced a PPA between TVA and Kairos for 50 MW from Kairos’ Hermes 2 plant for the grid powering Google’s data centers in Alabama and Tennessee. Hermes 2 is scheduled to begin operations in 2030. This was part of Google’s larger agreement to purchase energy from Kairos’ SMRs, with a view to 500 MW by 2035.
Amazon has an MOU with Dominion Energy (D) to explore ways to support SMR development and financing in Virginia. Amazon is also partnering with Energy Northwest and X-Energy for SMRs in Washington State, with Amazon funding the initial feasibility phase of an SMR project. The project will use X-Energy’s XE-100 design, which can generate up to 80 MW of power per module. Amazon is also an investor in X-Energy.
Equinix (EQIX) has agreements with multiple SMR providers around the globe. For example, EQIX has signed an agreement for 500 MW of power from Oklo’s (OKLO) Aurora Powerhouses. Equinix also has a letter of intent with ULC-Energy to buy power for data centers in the Netherlands. ULC-Energy uses Rolls-Royce (RR.LN) SMRs.
Equinix is just one of Oklo’s multiple partners. Oklo boasts a hefty 14 gigawatt customer pipeline that includes data centers, utilities, and the industrial sector. Its positive momentum and long-term potential has driven a 500+% increase in its stock price year-to-date through October 2. Oklo uses fast reactor technology and intends to recycle nuclear waste to fuel its powerhouses. The company broke ground on its first Aurora Powerhouse in Idaho last month.
Ways to gain exposure.
For investors, AI and nuclear adoption represent important megatrends with notable growth opportunities. Those interested may prefer to get tailored exposure to these themes.
In that vein, Constellation Energy (CEG), Talen Energy (TLN), Dominion (D), Vistra (VST), Rolls-Royce (RR.LN), and Oklo (OKLO) are constituents of the Range Nuclear Renaissance Index (NUKZ), which underlies the Range Nuclear Renaissance Index ETF (NUKZ). Notably, the NUKZ index focuses on utilities, reactor operators, and technology developers, positioning it to directly benefit from end-user demand, pro-nuclear policy, and exciting innovations.
Alphabet (GOOGL), Meta (META), Amazon (AMZN), and Microsoft (MSFT) are constituents of the ROBO Global Artificial Intelligence Index (THNQ), which underlies the ROBO Global Artificial Intelligence ETF (THNQ). The THNQ index includes over 50 companies in AI infrastructure and application, including lesser-known names driving innovation.
Bottom line:
Nuclear represents an attractive power solution for data centers given its reliability and clean qualities. Select nuclear plants can help meet power needs in the near term, while SMRs represent a compelling solution in the long run.
For more on this topic, please join our upcoming webcast, “The Three-Body Framework: Artificial Intelligence, Human & Robotic Health,” on October 8 at 11 a.m. ET (register here).
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Originally published on ETF Trends
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