The surge in artificial intelligence (AI) has led many companies to urgently reassess their energy strategies. These companies, along with several countries, have also committed to slashing carbon emissions to help slow climate change. Relying solely on renewable sources isn't enough right now to meet these escalating (and competing) needs.
Last year, several countries endorsed the Declaration to Triple Nuclear Energy to address these growing energy demands, pledging to increase their nuclear energy capacity by three times by 2050. This initiative garnered support from major financial institutions like Bank of America and Goldman Sachs, underlining nuclear energy's pivotal role in fulfilling our future clean energy requirements.
With the global demand for nuclear power expected to grow long-term, here are three stocks to keep an eye on in this evolving landscape.
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1. Constellation Energy
As cutting-edge AI models advance, their energy requirements for power-hungry data centers have surged. According to research from Goldman Sachs, data center power demand is expected to increase by around 15% annually through 2030 and could eventually account for about 8% of total power demand in the U.S.
To address these growing needs, tech giants are forging partnerships with nuclear energy providers, marking a significant shift in how we think about energy consumption in the tech industry. Last month, Microsoft made headlines by signing a 20-year power purchase agreement with Constellation Energy (CEG -0.92%), which includes the prospect of restarting Three Mile Island Unit 1.
Constellation is one of the largest clean-energy producers in the U.S., generating a capacity of 32,400 megawatts, with 86% of its output from nuclear. The company supplies about 10% of the nation's clean energy, and 90% of its energy is carbon-free.
With the growing demand for carbon-free nuclear power, Constellation Energy is one solid stock to own to capitalize on these trends.
2. Cameco
Cameco (CCJ -0.13%) is one of the largest publicly traded companies in the uranium industry and has significant mining operations in Saskatchewan and the United States. It also holds a 40% interest in a joint venture with Kazatomprom in Kazakhstan and a 49% stake in Westinghouse Electric with Brookfield Renewable Partners, strengthening its position in nuclear services.
In Canada, Cameco operates two uranium mines in Cigar Lake and McArthur River in Saskatchewan while also managing one of the world's largest commercial refineries, in Ontario. The company is set to produce 23.1 million pounds of uranium this year.
It is well positioned to meet robust demand as supplies remain tight due to underinvestment in development and exploration, along with the recent U.S. ban on Russian uranium imports.
Although there aren't immediate plans to build new reactors in the U.S., significant efforts are being made to grow nuclear energy production, including upgrading the capacity of existing plants, extending their operational lifespans, and even bringing retired nuclear facilities back on line.
Forecasts from Citigroup suggest that uranium prices could average around $110 per pound next year, up from about $77 currently, driven by rising demand that outpaces supply. Longer term, the International Atomic Energy Agency (IAEA) projects that nuclear capacity could increase by as much as 2.5 times from current levels by 2050. As one of the largest uranium suppliers globally, rising demand should be a tailwind for Cameco's mining operations.
3. NuScale Power
One of the more promising developments in nuclear energy is small modular reactors (SMRs). This innovative technology offers a modular and scalable approach to nuclear energy, making it an ideal choice to meet the power needs of remote areas or high-demand industrial and data center facilities.
As of now, NuScale Power (SMR -10.59%) is the only company to secure Standard Design Approval from the U.S. Nuclear Regulatory Commission, for its 50-megawatt SMR.
The design of SMRs would allow for prefabrication at a plant, with the components then transported for assembly at the project site. This streamlined process could potentially reduce the costs and the time required to bring these reactors on line, which is why they have captured the attention of tech companies and investors.
However, recent experiences have shown the hurdles this technology still has to overcome. For example, the Utah Associated Municipal Power System (UAMPS) recently terminated a 2015 agreement with NuScale due to delays and escalating expenses, underscoring the complexities involved.
Although NuScale is at the forefront of an exciting technological revolution in nuclear energy, it is important to note that the deployment of SMR technology is still years away. The company recently partnered with Standard Power to establish two facilities in Ohio and Pennsylvania using its SMR technology. They could be operational by 2029 if all goes according to schedule.
For now, NuScale will be driven by investor sentiment around its achievements and the larger narrative surrounding the future of nuclear energy. That said, the exciting technology makes this stock worthy of a spot on your watch list as it evolves and develops over the next few years.
