Google Is Betting Big on Nuclear Reactors—Should You?

Google made several headlines related to artificial intelligence (AI) this week. And, despite the stock’s performance, not all were negative.

Of course, the news of search losing preference to AI chatbots like ChatGPT amongst iPhone users grabbed the top story, and the Department of Justice continues to look into antitrust measures against the company’s ad tech business. However, the Alphabet Inc. (NASDAQ: GOOGL) subsidiary continues to spend heavily on AI infrastructure and recently entered an agreement with Elementl Power to develop three new nuclear development sites to power its surging data center energy needs.

Elementl Power is a privately held firm specializing in developing and financing advanced nuclear power projects for clients seeking clean energy solutions. The proposed projects would each produce 600 megawatts of power and operate under Elementl Power’s supervision.

Google isn’t the first company to embrace nuclear power, as Microsoft Corp (NASDAQ: MSFT) and Amazon Inc. (NASDAQ: AMZN) have also made deals with nuclear energy providers in recent months. But this is a confirmation signal of a larger trend: megacap tech firms are looking for clean (and scalable) energy solutions for their ever-expanding data center operations.

Energy sector shifts like this could present opportunities for investors as public companies in the clean energy space link up with tech firms to power the next generation of AI models—and here’s why.

The AI + Nuclear Nexus: What’s Driving the Demand?

Have you ever blown a fuse in your house because you have too many appliances running simultaneously? It’s more of a minor headache than what tech companies working on AI are dealing with, but the central concept is the same: too many electronic mouths to feed. AI data centers require a vast amount of electricity, and powering these energy hogs may require alternative sources moving forward.

Nuclear energy is important to the firms training AI models for various reasons. For starters, it is a clean energy, which is vital for companies like Google and Microsoft with carbon-free goals and strong environmental, sustainability, and governance (ESG) standards. Reliability is another factor, as nuclear facilities have a consistent baseload and aren’t dependent on uncontrollable factors like wind or sunlight.

As pressure to keep data centers efficient and ESG-compliant increases, clean sources like nuclear power will continue to appeal to the tech sector. And while many of these new nuclear sites won’t be coming online for several years, the time is now for AI innovators to make deals and lay the groundwork for their future energy needs.

3 Public Players Getting In on the Action

Ready to invest in the future of nuclear energy? Here are three publicly-traded energy companies that have already struck nuclear power deals with big tech companies to consider adding to your portfolio.

1. Constellation Energy: Nuclear Giant Powers Microsoft’s AI Future

Constellation Energy (NASDAQ: CEG) is the largest nuclear power producer in the United States, and the company recently cemented this fact by negotiating a 20-year partnership with Microsoft.

In October, Constellation announced a plan to reopen a transformer at Three Mile Island in Pennsylvania, part of a $1.6 billion investment to revitalize the shuttered plant. The company plans to use the site to provide Microsoft data centers with 835 megawatts of nuclear power.

CEG is up over 50% in the last three months, buoyed by 10% year-over-year (YOY) revenue growth.

The company recently reported a top and bottom line earnings beat, and has a consensus Moderate Buy rating with an average price target of $282.

2. NuScale Power: Small Reactors, Big Potential for AI Data Centers

NuScale Power (NYSE: SMR) is the first company in the United States to receive regulatory approval for small modular reactors (SMRs), which require less infrastructure than traditional large-scale plants.

These compact, scalable reactors offer a wider range of options for companies looking to scale their operations—and NuScale’s partnership with Standard Power highlights these perks.

Under the agreement, Standard Power plans to deploy 2 gigawatts of SMR energy to data centers in Pennsylvania and Ohio.

NuScale has a Moderate Buy rating based on five analyst reports, but the most recent one from BTIG Research gave the stock a $20 price target, which would imply an upside over 30%.

3. Oklo: Startup Strikes Mega AI Power Deal with Switch

Oklo Inc. (NYSE: OKLO) may not be as big as Constellation, but the deal it signed with Switch last December just might eclipse the one Constellation signed with Microsoft.

One of the leading designers and operators of data center campuses, Switch uses 100% clean energy in its projects and is committed to sustainability across its operations.

As part of their new partnership, Oklo has agreed to provide 12 gigawattsof nuclear power through 2044. This signifies growing confidence in Oklo’s SMR technology and its potential to serve the power-hungry AI sector.

OKLO shares have a Moderate Buy rating with an average price target of $46, indicating upside of more than 70%.

Written by Dan Schmidt

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