While there are many promising nuclear stocks out there, only a few have as unique of an opportunity as NuScale Power (SMR +1.63%).
Over the next couple of decades, experts believe that nuclear energy will be a $10 trillion opportunity. That opportunity is largely driven by the global build-out of data center infrastructure designed to meet the growing needs of artificial intelligence (AI) technologies.
Data centers -- critical infrastructure on which AI technologies rely -- are energy-intensive. Yet the current electric grid isn't strong enough to support the ongoing build-out of data centers. Thus, additional energy generation capacity will be needed, and NuScale's nuclear systems may be a perfect fit for two reasons.
NYSE: SMR
Key Data Points
1. Data centers need new energy sources fast
The pace and scale of the global data center build-out are arguably unprecedented. "The race to scale AI has triggered one of the largest infrastructure build-outs in modern history," concludes a recent report from global consultancy McKinsey & Co. "By our estimates, global spending on data centers could reach $7 trillion by 2030."
Conventional power plants often require more than a decade to permit and build. So while these largest, more proven plants will play a role in meeting AI's long-term energy needs, more immediate solutions will be required. That's what makes NuScale's approach to nuclear so interesting.
NuScale was the first company to receive approval from the Nuclear Regulatory Commission for a small modular reactor, or SMR. At least in theory, these nuclear plants can be built faster and cheaper than conventional plants, with the option to expand generation capacity down the line. With data centers needing new energy sources quickly, NuScale's SMRs offer a compelling solution.
Image source: Getty Images.
2. NuScale's SMRs should deliver reliable and clean power
While lead times vary, natural gas plants that produce electricity often take between two and seven years to construct. That makes them a viable solution for meeting the near- and medium-term needs of the AI and data center industries. Many big tech companies, however, have made climate pledges to either reduce or completely offset their carbon footprints. These pledges limit the potential for natural gas adoption as a power solution, especially amid regulatory and pricing uncertainty surrounding a global fossil fuel.
SMRs, on the other hand, emit very little carbon into the atmosphere. They only need refueling every three to seven years, though some designs don't need refueling for a decade or more.
SMRs, therefore, not only have the potential to be built much more quickly than conventional power plants, but also retain the low-carbon benefits of nuclear and the reliable base-load generation capacity of natural gas. Time will tell how attractive NuScale's SMRs are in real-world settings. The company has yet to get its first system online, a feat that may not be achieved until 2030, or even beyond. But the company is likely positioned for a strong decade of growth once construction begins..
