Artificial intelligence (AI) took the world, and the stock market, by storm in early 2023 and has not slowed since. Investors have flocked to the companies developing and producing the chips to power AI models, the cloud companies building massive AI data centers, and even the software companies deploying AI applications.
However, the energy required to power all this innovation could become an increasingly hot topic in the coming years. According to estimates by Wells Fargo, AI technology's electricity consumption could increase from 8 terawatt-hours in 2024 to 652 terawatt-hours by 2030. Nuclear power could help solve this challenge. Emissions could discourage fossil fuel use, and renewable energy remains too intermittent to depend on alone. That opens the door for nuclear power, which is efficient and clean.
Nuclear power comes from fission, a process that involves splitting atoms to cause reactions that unload significant amounts of energy. Much of the energy released during fission is heat, which power plants use to heat water. The steam drives turbines to generate electricity.
AI's long-term energy needs could help fuel growth in companies exposed to nuclear energy, so consider buying these three top nuclear stocks in January.
1. Cameco
Uranium is the fuel used for nuclear fission, and Cameco (CCJ 1.84%) is one of the leading uranium producers. The Canadian company accounts for approximately 18% of the global uranium supply and has controlling interests in uranium mines in Canada, the United States, and Kazakhstan. The company is poised for long-term growth as big technology companies and entire countries consider nuclear power as a way to meet energy needs while reducing carbon emissions. For example, Meta Platforms recently announced plans to source nuclear energy to power its AI data centers, starting in the early 2030s.
CCJ Revenue (TTM) data by YCharts
It's becoming apparent that nuclear energy is gaining momentum. According to the International Atomic Energy Agency, 63 nuclear reactors are currently under construction, and demand for nuclear could grow by as much as 2.5 times its current capacity by 2050. In addition, geopolitical tensions, including the U.S. ban on uranium imports from Russia, could further boost business for Western producers like Cameco.
Cameco's business has picked up over the past couple of years. Analysts estimate that the company's revenue will hit $2.3 billion in 2025. Assuming governments and corporations continue supporting nuclear energy, this could be the early stages of a very long growth story.
2. Southern Company
Those who don't want a pure nuclear investment could consider Southern Company (SO 0.30%), one of the largest energy companies in the United States. Its core businesses include electricity generation and electric and natural gas utilities that serve more than 9 million customers. Utility businesses produce dependable revenue streams because society's energy needs never stop. Southern Company's energy production also spans several sources, including gas, coal, nuclear, and renewables.
Southern Company has invested heavily in nuclear energy. It operates eight total power units across three plants, and its newest units were the first newly constructed in the U.S. for commercial operations in three decades. Earlier this year, Microsoft and Constellation Energy inked a 20-year deal to restart a nuclear power unit at the Three Mile Island Nuclear Station in Pennsylvania to power its data centers. This potential game-changer for the industry opens the door for Southern Company, located near Virginia, the country's data center capital, to do something similar.
SO PE Ratio (Forward) data by YCharts
In the meantime, the stock offers a 3.5% dividend yield, compensating shareholders for holding the stock. It's not the cheapest utility, at 20 times earnings, but it isn't unbearable for long-term investors, especially if AI tailwinds rev up Southern Company's long-term growth.
3. GE Vernova
Longtime conglomerate General Electric split into pieces, and its energy business, GE Vernova (GEV 4.45%), now stands on its own. GE Vernova is a diversified clean energy technology company that deals in clean power generation, grid electrification, and wind and gas turbines. Its power generation business includes nuclear, providing reactors, fuel, services, and steam turbines for electricity generation.
Society is slowly and steadily transitioning from fossil fuels to cleaner energy alternatives. Such a shift will take many years, potentially positioning GE Vernova for a multidecade growth opportunity. Management currently anticipates high single-digit revenue growth through 2028. GE Vernova is also investing $5 billion cumulatively through 2028 in research and development to drive long-term growth.
GEV PE Ratio (Forward) data by YCharts
The stock isn't cheap, at a forward P/E ratio of 124. However, analysts estimate the company will grow earnings by an average of 46% annually over the long term, so strong earnings growth comes with that price tag. Investors unsure about buying in here can nibble for now and buy more aggressively if the stock pulls back. That said, it's hard not to like the stock's long-term potential amid soaring electricity demand and a clean energy transition.
