As the AI investment thesis increases in both size and merit, some market participants are looking for derivative plays. On that note, one of the ideas that’s emerging with ample momentum is the utilities sector. That indicates AI can jazz up even the sleepiest of sectors.
Add nuclear power to that conversation. With increased credibility as a green energy source, nuclear is experiencing a well-documented renaissance. And this renaissance is lifting related stocks and ETFs. Just look at the VanEck Uranium and Nuclear ETF (NLR ), which is higher by 27% over the past year. That’s one sign NLR member firms could benefit from AI. And more of those gains might accrue over the long term.
Consider nuclear power’s advantages. It doesn’t emit carbon dioxide, which is good news for AI adopters and enablers worried about sustainability credentials. Additionally, nuclear power’s reliability and ability to meet steady, not volatile, demand is highly suitable for the data centers that are so crucial in AI.
Some Big AI Names Embracing Nuclear
It’s clear some of the companies emerging as AI leaders are embracing nuclear power. That could bode well for NLR going forward.
“Last month, Constellation Energy announced a 20-year power purchase agreement (PPA) to provide electricity to Microsoft data centers in the mid-Atlantic region from the Unit 1 reactor at the Three Mile Island nuclear power plant in Pennsylvania,” according to the Energy Information Administration.
Earlier this year, Amazon Web Services inked a deal for nuclear power Talen Energy’s Susquehanna nuclear power, which is also located in Pennsylvania. AI companies see value in nuclear power. And the Amazon and Microsoft deals could set the stage for more of the same.
Add to that, Amazon and Microsoft are two highly sustainability minded companies. Their willingness to use nuclear energy to support AI efforts could add credibility to nuclear’s green resume. Importantly, data center owners contracting with nuclear power providers don’t need to consumer all the power they’ve contracted for. That indicates excess power could be sold elsewhere.
Bottom Line
Nuclear could power the AI boom. While some questions still need answers, the overall trajectory appears positive.
“Although the two agreements underscore that data center operators are in search of large sources of emissions-free electricity, future electricity demand from data centers is subject to several [uncertainties. These include] how much data center capacity will be built, how long it will take each data center to reach its peak demand capacity, and how energy efficiency will improve as data center technology and design evolve,” added the EIA.
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