Investors often operate with notoriously short-term time horizons. But now that nuclear power is suddenly hip, given its ties to artificial intelligence and roaring demand for power-hungry data centres, long-term thinking is in.
Well, for now.
This week, a number of stocks tied to North America’s nuclear power arsenal rallied after Amazon.com Inc. (AMZN-Q) announced a major investment in power projects to feed its rising need for new, stable sources of clean energy – becoming the latest big tech company to pursue nuclear ambitions. Microsoft, Google and Oracle also have plans to harness nuclear power.
Amazon teamed up with Dominion Energy Inc. (D-N) to back the development of small modular reactors, or SMRs, in Virginia, where power demand is expected to double over the next 15 years.
The company is also part of a new US$500-million financing deal with X-energy Reactor Co., a privately held SMR developer.
The collaboration “is a significant step toward accelerating advanced nuclear technologies that can help us bring new sources of carbon-free energy to the grid cost-effectively and safely,” said Kevin Miller, Amazon’s vice-president of global data centers, said in a release.
The hope is that smaller reactors can be built faster and on-budget, compared with larger power plants that might become weighed down by delays and cost overruns. SMRs also have a smaller footprint, making them suited to more areas.
Still, they aren’t exactly speedy builds right now in these relatively early days for the advanced technology.
The goal with X-energy is to bring more than five gigawatts of new power projects in the United States by 2039. The deal with Dominion Energy is merely a first step in evaluating the technology.
But judging from the reaction in the stock market on Wednesday, when Amazon made the announcements, investors aren’t waiting around.
Dominion Energy shares rallied 4.9 per cent.
Constellation Energy Corp. rose 6.6 per cent, expanding its year-to-date gain to more than 140 per cent. Constellation, the largest owner of U.S. nuclear power plants, last month announced a power purchase agreement with Microsoft Corp. that will lead to restarting the Three Mile Island nuclear plant in Pennsylvania.
“We currently see uranium demand growing by 3.5 per cent annually to 2035 from traditional reactors. However, big tech could supercharge this,” Katie Lachapelle, an analyst at Canaccord Genuity, said in a note.
And speaking of supercharging, NuScale Power Corp. (SMR-N), which is developing proprietary SMR technology, soared 34 per cent on Wednesday, bringing its year-to-date gain to 480 per cent.
The stock has left other nuclear plays – and even stocks associated with AI, such as Nvidia Corp. (NVDA-Q) – in its wake in 2024. The company is now valued at US$4.6-billion, based on the total of its outstanding shares midday Thursday.
One problem with investors’ enthusiasm for the stock: NuScale reported revenue of just US$1-million in the second quarter and a loss of US$74.4-million, suggesting that this bet rests more on potential than current performance.
To be sure, nuclear power is enjoying a resurgence that promises to deliver meaningful growth over the long-term.
Apart from Amazon and Microsoft, Google-parent Alphabet has teamed up with Kairos Power to develop a fleet of advanced nuclear power projects by 2035. Another tech giant, Oracle Corp., announced in September that it is designing a data centre that will be powered by three small reactors.
This sort of interest, with more likely coming as more deals are announced, confirms that a “nuclear supercycle” has arrived, according to Benoit Poirier, an analyst at Desjardins Securities.
In a note last month, he argued that the benefits could extend well beyond the likely suspects and into Canadian companies, such as WSP Global Inc. (WSP-T), Stella Jones Inc. (SJ-T) and Aecon Group Inc. (ARE-T), which serve large utilities and can help expand the power grid.
As well, companies like Cameco are already seeing the resurgence of nuclear power in their financial results. In its second quarter, the uranium producer reported a 24-per-cent increase in its revenue.
It has commitments to deliver an average of about 29 million pounds per year from 2024 through 2028, up from 28 million pounds per year at the end of March. Demand for uranium looks set to rise even further over the longer term.
Investors are embracing a promising future for nuclear power, as demand for clean energy rises among energy hogs with lots of capital. With stocks already powering ahead, though, today’s bet rests on something far more precarious: That investors will keep believing.