Multiple nuclear power stocks surged to a record high, AI driving the "nuclear power renaissance"

After more than a decade of downturn, the nuclear energy industry seems to be gradually reviving due to the significant demand for electricity from AI data centers. Previously, HSBC had indicated that the development of Small Modular Reactors (SMRs) is receiving more attention in the market, with increasing investments in SMRs globally.

Just last week, Amazon and Google reached a milestone power supply agreement, paving the way for the deployment of the first batch of SMRs in the United States. As a result, many U.S. nuclear energy stocks surged significantly, reaching historic highs.

The stock prices of SMR developers Oklo Inc and NuScale Power rose by 99% and 37% respectively in the past week. Additionally, companies such as Cameco, Oklo, NuScale, Constellation, and BWX Technologies all hit record highs.

Today, SMR developers are confident about the industry's prospects, believing that tech giants are the "game changers" they need. Clayton Scott, Chief Commercial Officer of NuScale, stated:

The tech industry not only values the benefits of carbon neutrality, but also emphasizes availability and reliability... the industry trend has arrived.

However, at the same time, there are still doubts in the market about SMRs and even the entire nuclear energy industry.

SMR Operators Become "Hot Cakes"

The aforementioned agreement supports the deployment of up to twelve next-generation reactors, aiming to provide low-carbon electricity for Amazon and Google's energy-intensive AI data centers.

The surge in data centers is driving historic growth in U.S. electricity demand. Seth Grae, CEO of Lightbridge Corporation, a nuclear fuel developer and Chairman of the International Board of Directors of the American Nuclear Society, stated that companies operating reactors have been saying for some time that they need to meet the surge in demand for AI electricity, but it seems that no one believes them:

These large-scale investments indicate that the tech industry believes that renewable energy and batteries cannot provide sufficiently stable or cost-effective electricity, hence the need for nuclear energy.

Now, Amazon and Google's decision to invest in small reactors reflects their need to find reliable, cost-effective, and clean electricity to power the new wave of AI data centers. According to Wood Mackenzie's data, the total installed capacity of new data centers announced by enterprises in the first half of 2024 is close to 24GW, more than three times that of the same period last year.

Mike Laufer, Founder and CEO of Kairos Power, stated:

This is not only to replace existing fossil fuel power generation, but we also need to build more now. This makes people truly feel the sense of urgency.

Clay Sell, CEO of X-Energy:

The only limiting factor for the United States to maintain its leadership in artificial intelligence is electricity. Not land, not chips, but electricity. Therefore, this is the top priority.

"Any experimental nuclear energy technology that wants to achieve safe and reliable commercial operation is destined to be bumpy."

Supporters of SMRs believe that they are smaller, safer, and more efficient than large nuclear reactors. However, until recently, investors have been cautious about SMRs. They have expressed concerns about whether the projects can be completed on time and within budget, coupled with high interest rates and a lack of customers, so progress in the industry has been relatively slow.

Last year, private SMR developer X-Energy was forced to abandon a $1.8 billion plan to go public through a special purpose acquisition company due to "harsh market conditions." Shortly after, NuScale canceled its plans to build the first small reactor in the United States.

TD Cowen analyst Marc Bianchi commented on this:

The dilemma facing the SMR industry is that customers are reluctant to sign up for the 'first reactor' because it is more expensive and riskier than subsequent reactors.

Moreover, there are also doubts about the entire nuclear energy industry in the market.

Edwin Lyman, Director of Nuclear Power Safety at the Union of Concerned Scientists, stated that X-Energy and Kairos' SMRs are "untested designs," and their deployment time may be much later than the target date of 2030:

Any experimental nuclear energy technology aiming for safe and reliable commercial operation is bound to be bumpy, and it is almost impossible to estimate the final cost of electricity today.

According to data from Lawrence Berkeley National Laboratory, solar, wind, and battery storage account for 95% of all pending grid capacity, while nuclear energy accounts for less than 1%. In the United States, no small reactor projects have started construction, and over 80% of the announced capacity has not entered the development pipeline