In today’s issue:
- Big Tech is not going all-in on nuclear
- AI means Big Tech isn’t fussy where it gets its power from
- From mini nuclear reactors to giant solar farms, one metal underpins it all
Nuclear returns are living up to all the cheap puns you could dream of.
They’re on fire… they’re going nuclear… shares are hotting up in a fusion of innovation… a remarkable turnaround for what was until recently a radioactive sector…
Etc Etc.
But, yes, the last week has seen a true explosion in the sector, with shares in nuclear energy companies surging to record highs after both Amazon and Google struck landmark power supply deals, boosting efforts to deploy the first small modular reactors (SMRs) in the US.
An SMR is an advanced type of nuclear reactor with a smaller footprint that allows it to be built closer to the grid. They also have faster construction times than traditional reactors, allowing them to come online sooner.
The share prices of US-listed SMR developers Oklo Inc and NuScale Power rose 99% and 37%, while shares in Cameco, NuScale, Constellation Energy and BWX Technologies all traded at record highs over the week.
The reason for that is that SMR technology – seen by many as speculative, small-scale and years from commercial relevance – has been thrust into the spotlight after Big Tech started its very own nuclear arms race to fuel the energy demands of AI.
Last Wednesday, Amazon Web Services (AWS), Amazon’s subsidiary in cloud computing, announced it is investing more than $500 million in SMR technology, announcing three projects from Virginia to Washington state.
But Amazon, which also bought a data centre powered by nuclear energy from Talen Energy in March, is just the latest large tech company to buy into nuclear power to fuel the growing demands from data centres.
Earlier last week, Google announced it had signed its own deal with California-based nuclear firm Kairos Power to build new SMRs to supply its US data centres with energy.
Although the location of these reactors is yet to be revealed, Google said the first will be operational in 2030, with more to follow by 2035.
Google has agreed to buy a total of 500 MW of power from Kairos, which is building a demonstration reactor in Tennessee, due to be completed in 2027.
As you’ll know, the explosive growth of generative AI, as well as cloud storage, has increased tech companies’ electricity demands.
Last month, Microsoft struck a deal to take energy from Three Mile Island, activating the nuclear plant for the first time in five years.
With Google, Microsoft and Amazon all piling into nuclear, you would think that other Big Tech firms such as Apple and Meta will also be looking to join the party, too.
Big Tech is not going all-in on nuclear
However, it’s worth noting that Big Tech is not going “all in” on nuclear. Rather, it is investing in nuclear very much as part of a wider clean energy portfolio.
In May, Microsoft struck a landmark deal with Brookfield Asset Management, committing to back an estimated $10 billion in new renewable energy projects to address the ever-growing power demands of AI and datacentres.
In fact, so far in 2024, Microsoft has bought 850 MW of new wind and solar just in Texas alone. The Seattle-based tech giant is also buying 12 GW of US made solar panels from Qcells.
In addition to Microsoft, Brookfield has also announced power purchase agreements with Amazon.
You see, while Big Tech is certainly investing in nuclear, they are actually making even larger investments in wind and solar – and have been for years.
Indeed, despite what you might have read elsewhere, Big Tech is not just looking to build AI with nuclear, but with other energy sources, too.
So how should investors look to play this?
Well, what’s interesting is that one particular metal is needed for all of the commitments and deals mentioned above.
It’s actually the second most widely used industrial metal, but I’d wager you wouldn’t guess what it is.
In nuclear, this metal has a relatively small role absorber in the control rod assemblies that are used to regulate the rate of fission in the reactors.
Without the control rods, the heat-generating nuclear fission reaction would grow exponentially. The special properties of this material are essential to the safe operation of nuclear power. It doesn’t need so much of it, but it’s a highly critical component.
In AI, however, its role is larger. Some have even gone as far as saying “without it, AI – and much of electronic tech – wouldn’t exist.”
Indeed, its thermal conductivity gives it a role all the way along AI’s value chain, from semiconductor factories to sensors and connectors.
No wonder, a global think tank estimates that 2024 will see the second highest annual demand for this metal in history, much of it driven by the renewables industry.
The metal is a key component in photovoltaic cells used in solar power – the average solar panel requires 20 grams of it – while electric vehicles also use between 25 and 50 grams of the material.
With nuclear now regaining its status as a key energy technology, the AI revolution entrenching itself into the global economy, and renewable/EV growth continuing to “surprise” people – this single metal has numerous enormous demand drivers.
So it won’t surprise you to learn that the price has just started to move higher. It’s building momentum, but on many metrics, it’s still historically undervalued, and has plenty of room to run on that basis.
There are numerous ways to play this incredible opportunity.
To see how we’re doing it…
Until next time,
James Allen
Contributing editor, Fortune & Freedom
