Nuclear energy is making a comeback in the U.S. in a big way. Fossil fuels contribute to global warming, and solar and wind energy face limitations. Add to that the rapid adoption of energy-hungry artificial intelligence (AI) data centers, and you have a perfect storm driving demand for nuclear power.
It's a bit ironic, then, that Nvidia (NVDA 1.54%), whose graphics processing units (GPUs) underpin advances in AI, is partnering with nuclear start-up Oklo (OKLO +5.70%) to advance the next generation of nuclear power.
Image source: The Motley Fool.
In a press release that dropped on Thursday morning, Oklo announced that it was partnering with Nvidia and the Los Alamos National Laboratory (LANL) to advance nuclear research, nuclear fuel, and critical infrastructure.
"The collaboration is intended to combine advanced nuclear power, AI, digital twins, modeling, and simulation to support critical infrastructure development and accelerate the deployment of nuclear energy," according to the press release.
The trio plans to develop physics- and chemistry-based AI models, with an emphasis on AI inference models to support nuclear fuel validation, the process used to ensure nuclear fuel rods meet all the applicable safety and regulatory standards necessary for use in a nuclear reactor.
They will also conduct research and development into the materials and fabrication of plutonium-based fuels. There will be studies on power generation, grid reliability, and redundancy, and stabilization, in support of nuclear-powered AI factories at LANL.
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This collaboration comes just months after Oklo signed a deal with Meta Platforms to develop a 1.2-gigawatt power-generation campus in Pike County, Ohio. The plans are for the facility to provide power to Meta's data centers in the area. As part of the agreement, Meta can prepay for power, providing funding to ensure the project moves forward.
A renaissance for nuclear power generation
Nuclear energy is enjoying a renaissance. After years of living in the shadow of Three Mile Island, the acceptance of nuclear power generation is beginning to gain momentum in the U.S. The timing of this revival isn't a coincidence.
According to a report released by Bank of America, nuclear energy represents a $10 trillion opportunity in the coming years and could "hold the answer to the world's power shortages." The report goes on to say that "nuclear energy has, in many ways, been recently 'rediscovered' amid surging electricity demand. Compared with other energy sources, it offers reliable baseload power, a smaller carbon footprint, and a higher energy return on investment."
Given the magnitude of the opportunity, it's no surprise that Nvidia is expanding its AI-centric reach into nuclear power. The company has been investing in Neocloud providers, optical connectivity in data centers, and even chip foundries to capitalize on the growing adoption of AI.
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For its part, Oklo will likely get further validation of its compact, fast-fission powerhouses, which are part of the Department of Energy's (DOE's) Reactor Pilot Program to "accelerate advanced nuclear deployment and to modernize nuclear licensing." The company's fast fission reactor can recycle used nuclear fuel (nuclear waste) for power generation. This provides Oklo with an abundant energy source for years to come.
The company's vision of the future is making the leap from the drawing board to reality, attracting the attention of Wall Street.
Analysts at HSBC initiated coverage on Oklo with a buy rating and a $96 price target. That represents potential upside of 33% compared to Wednesday's closing price. The analysts cited Oklo's goal of integrating fuel, power, and isotope production under one roof. Moreover, the company's potential to generate revenue, coupled with its strong balance sheet, results in an attractive opportunity.
To be clear, Oklo doesn't yet generate meaningful revenue, and the company's future hinges on the eventual regulatory approval for its next-generation small modular reactors.
Investors should weigh these factors carefully before considering an investment.
