Amazon, Google And Microsoft Bet Big On Nuclear: AI's Growing Energy Demands Fuel New Projects

The rapid proliferation of Artificial Intelligence (AI) is resulting in externalities for the energy landscape, specifically the accelerated adoption of nuclear energy as a power source. In recent months, various big tech firms have announced their involvement in several nuclear energy-related projects to generate the necessary power for their ongoing AI development initiatives.

The Growing Need For Nuclear

Recently, Amazon Web Services (AWS), Amazon's AMZN subsidiary in cloud computing, announced that it had signed an agreement with Dominion Energy D*, Virginia's utility company, to explore the development of a small modular reactor (SMR) near Dominion's existing North Anna nuclear power station. In mid-October, Amazon announced that it would be investing more than $500 million in nuclear power, across three projects from Virginia to Washington state.

SMRs are advanced nuclear reactors with a power capacity of up to 300 Megawatts electric (MW(e)) per unit, about one-third of the generation capacity of traditional nuclear power reactors. SMRs can produce a large amount of low-carbon electricity and are becoming a source of energy for AI data centers.

According to CNBC, Virginia is home to nearly half of all the U.S. data centers, with one area in northern Virginia dubbed Data Center Alley. An estimated 70% of the world's internet traffic travels through Data Center Alley daily, with Dominion Energy serving roughly 3,500 megawatts from 452 data centers across its service territory in Virginia. About 70% is in Data Center Alley. Dominion Energy projects that power demand will increase by 85% over the next 15 years. AWS expects the new SMRs to bring at least 300 megawatts of power to the Virginia region.

Amazon has also announced a new agreement with Energy Northwest, a consortium of public utilities, to support the development, licensing and construction of four SMRs in Washington state. While Energy Northwest will build, own and operate these reactors, the generated energy will feed directly into the grid, contributing to Amazon’s energy needs. 

Through this agreement, Amazon gains the right to purchase electricity from the first four SMR modules. Additionally, Energy Northwest has the option to construct up to eight more modules, which could supply power to Amazon and regional utilities, potentially serving both residential and commercial needs across the Northwest.

Google And Microsoft Also Make Nuclear Power Deals

Amazon is not the only big tech firm exploring nuclear power as a source for powering their AI development, as Google (Alphabet Inc) GOOG* recently announced a deal with Kairos Power, an advanced nuclear energy company focused on developing affordable, safe and flexible nuclear reactors using molten salt technology. 

The deal sees Google buying power from Kairos via small modular nuclear reactors the company will be building. The initial phase of work is intended to bring Kairos Power's first SMR online quickly and safely by 2030, followed by additional reactor deployments through 2035. This deal, Google says, should enable up to 500 MW of new 24/7 carbon-free power to U.S. electricity grids. The company also argues that it may help more communities benefit from "clean and affordable nuclear power."

Similarly, as reported by Bloomberg, Microsoft Inc. MSFT has brokered a deal with Constellation Energy Corp. CEG*, the biggest U.S. operator of reactors, to reopen the Three Mile Island nuclear plant in Pennsylvania. Constellation Energy will invest $1.6 billion to revive the plant, and Microsoft has agreed to exclusively purchase the energy generated from the plant for two decades.

Shares in nuclear energy companies surged to record highs in mid-October after Amazon and Google’s announcements. The Financial Times reports that the share prices of U.S.-listed SMR developers Oklo Inc OKLO rose by 99%, and shares in Cameco CCJ, NuScale Power SMR and BWX Technologies BWXT* all traded at record highs that week.

The Value Proposition Of Nuclear

The growing demand for energy globally and the need to move away from fossil fuels could be setting the stage for nuclear power. For a national, state or local utility, the appeal of nuclear power starts with its reliability. Furthermore, according to Science Direct, nuclear energy is the "safest and most renewable clean energy." 

The announcement of the various deals by big tech and nuclear energy providers has led companies involved in the industry to see an uptick in recent equity performance. Increasing energy demand due to AI development or general societal need is leading to nuclear energy increasingly becoming an energy source various stakeholders are looking to – making nuclear energy an industry that could be worth considering for interested investors. 

Investing In Critical Materials

As big tech firms find different avenues to power their data centers, there could be increased demand for the critical materials needed to generate, transmit and store cleaner energy. In the case of nuclear energy, uranium is an abundant source of concentrated energy for nuclear reactors. This presents a possible opportunity for investors, as having material exposure to uranium could enable them to benefit from any gradual price appreciation that may occur.

For investors seeking comprehensive exposure to companies involved in the uranium industry, the Sprott Uranium Miners ETF URNM and Sprott Junior Uranium Miners ETF URNJ are turnkey solutions that provide access to investable uranium companies. URNM provides investors with exposure to companies that devote at least 50% of their assets to the uranium mining industry, which may include mining, exploration, development and production of uranium, holding physical uranium, owning uranium royalties or engaging in other non-mining activities that support the uranium mining industry, by tracking the North Shore Global Uranium Mining Index. 

Meanwhile, URNJ reflects the performance of mid-, small- and micro-cap companies in uranium mining-related businesses, providing investment results that generally correspond to the total return performance of the Nasdaq Sprott Junior Uranium Miners™ Index.

For investors seeking to capitalize on the growth potential of AI, investing in critical minerals – such as uranium – could be an opportune way to gain tangential exposure to the technology's ongoing evolution.

Featured photo by Lukáš Lehotský on Unsplash.

This post contains sponsored content. This content is for informational purposes only and is not intended to be investing advice. 

*As of 11/20/24, none of the securities listed in the article are holdings of either URNM or URNJ.

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