AI takes massive amounts of energy to do even the simplest of tasks. Those billions and billions of calculations are now taking a bite out of the energy grids all around the world.
According to the International Energy Agency (IEA), data centers around the world currently account for 1.5% of the world’s total energy use. To put that into perspective, the continent of Africa uses 1%-6% of the world’s energy.
Furthermore, Wells Fargo has projected that AI power demand will increase 550% by 2026 and another 1,150% by 2030.
This is a problem, a very big problem.
This morning, Constellation Energy (CEG) announced that they would be restarting the Three Mile Island nuclear plant in a move to start increasing energy supply to meet AI’s growing demand.
There’s a catch though. Constellation is working directly to sell power from this plant directly to Microsoft (MSFT) to power their data centers. This follows the news earlier this week that Microsoft is teaming up with Blackrock to launch a launch an artificial-intelligence fund to enhance AI supply chains and energy sourcing.
Today’s deal between Microsoft and Constellation isn’t the first.
Amazon bought a data center from Talen Energy in March, that center is powered by the Susquehanna nuclear plant.
The message here is clear... The "The AI Energy Trade" is just getting started.
Data Centers and Their Utility Partners are Set for Massive Demand and Growth
We’re going to see a rush into these two spaces over the next five years as AI technology is fully released into the business environment.
Companies like IBM, Salesforce.com and Palantir are among my favorite AI service companies, but the space between them is where another huge opportunity lies.
Companies like Digital Realty, Iron Mountain and other data centers are growing at an unprecedented as they rush to get ahead of additional demand.
Two companies pop to the top of the list of the AI energy race given their size and the fact that they are already at work with data centers in key geographical regions.
Clearly a player, Constellation is the company that is restarting the plant at Three Mile Island to partner with Microsoft. Sidenote, the company is renaming the plant “Crane Clean Energy Center”.
In addition to that facility, Constellation Energy also operates all six nuclear power plants located in Illinois. Why is that important?
One of Iron Mountain’s largest data center expansion plans lies in the state of Illinois.
Constellation Energy shares are trading more than 100% higher over the last year, outpacing almost all the “AI Stocks” except for NVIDIA (NVDA). Give that some time though as CEG is in the earlier stages of growth while NVIDIA is a little higher on their AI growth trajectory.
The second largest operator of nuclear plants in the U.S. is Duke Energy (DUK).
Duke's nuclear footprint is strong in North Carolina with six plants in operation. One of those plants sits in Catawba County, which has been marketed as a growing data center hub for the last decade. The county’s proximity to Charlotte makes it an attractive alternative for data centers.
Moving away from there, western North Carolina is seeing fast data center growth as Apple, Google and Facebook have been taking advantage of inexpensive land prices and less regulation to create a data center hotspot. Conveniently, Duke Energy has a large footprint of nuclear and hydro plants in the area.
Small modular reactor stocks are exactly what the name suggests.
Several companies are in the process of developing smaller scale nuclear reactors that may be used to power data centers independently allowing the centers to have their own grid.
The move opens the possibilities of locating new data centers and could quickly answer the larger question of how to power them.
These companies are in the development phase, so keep in mind that they are more speculative in nature and that they can’t be expected to generate profits for a long time.
That said, these are the type of companies that one could see being purchased by a data center or AI company to “package” AI infrastructure solutions.
NuScale Power (SMR) specializes in advanced small modular reactor (SMR) nuclear technology. The company , offering the NuScale Power Module—a pressurized water reactor capable of generating 77 megawatts of electricity or 250 megawatts thermal.
The company was started in 2007 and headquartered in Portland, Oregon,
The company is notable for its innovative approach to nuclear power, designed to provide scalable, safe, and reliable carbon-free energy.
The company's technology was first certified by the U.S. Nuclear Regulatory Commission (NRC) in January 2023 for a 50 MWe design, with a more powerful 77 MWe design under review.
NuScale aims to facilitate the global energy transition by deploying its technology for electrical generation, district heating, and other applications.
Despite its pioneering technology, the company has faced financial challenges, including layoffs and project cancellations due to increased costs as they continue to develop their products.
Shares have traded more than 200% higher over the last year after dipping well below the $3.00 mark.
The stock is now trading in a long-term bullish trend with a price target of $25.
I’ve covered this stock heavily since its debut earlier in 2024.
Early in its growth, NANO Nuclear Energy (NNE) is a development company focused on microreactor technology.
The company aims to transform the energy landscape with small-scale, portable nuclear reactors. These reactors, including models like "ZEUS" and "ODIN," are designed to fit within standard shipping containers, making them highly deployable to remote locations or for specific industrial uses.
The company emphasizes safety and efficiency, with reactors capable of generating between 1 to 5 megawatts of power, ideal for small communities or industrial sites.
NANO's approach includes significant advancements in nuclear fuel technology and strategic partnerships to enhance the scalability and regulatory approval of their technology.
The company has engaged in proactive regulatory dialogues (note that no regulatory hurdles have been crossed) and is conducting rigorous testing and licensing procedures to ensure their reactors meet safety standards.
Shares of NNE do not have enough price data to confirm a long-term trend. That said, the stock crossed back above its 50-day moving average this week, suggesting a shift in momentum from sellers’ to buyer’s control.
