The artificial intelligence industry has an energy problem.
The data center infrastructure that AI technologies rely on to operate is so energy-intensive that the current electricity grid is nowhere near powerful enough to support the ongoing build-out of additional data centers.
Space Exploration Technologies (SPCX 4.24%) is hoping to solve the problem by placing data centers in space, where they would enjoy significant amounts of free, continuous solar energy and lower cooling costs in the relatively low temperatures of low Earth orbit. SpaceX CEO Elon Musk recently said he wants the company to launch orbital data centers by 2027.
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Investor sentiment toward orbital data centers is strong, as evidenced by SpaceX's $1.9 trillion valuation. Wall Street analysts see data centers in space as one of SpaceX's biggest long-term growth opportunities.
But NuScale Power (SMR 7.58%) is trying to meet AI's rising power demand through a very different strategy that could be superior to SpaceX's.
NuScale Power's terrestrial approach
The Department of Energy estimates that the U.S. will see total energy demand grow by as much as 20% over the next decade. Research from the Electric Power Research Institute, meanwhile, projects that data centers could consume up to 9% of U.S. electricity generation by 2030, up from 4% in 2023.
NuScale Power specializes in small modular reactors, or SMRs. "When compared to traditional, large-scale [nuclear power plants], SMRs require less land, shorter construction periods, and have enhanced safety features," concludes a report from Bank of America.
NYSE: SMR
Key Data Points
SMRs are also cheaper to build, at least until additional modules are constructed. But it's really shorter construction periods and lower land requirements that make the technology so attractive. That's because AI firms need more energy quickly, and smaller footprints mean SMRs could be co-located directly with data center infrastructure.
Only a handful of SMRs are currently in operation today. But more than 80 are now in some stage of development worldwide. And NuScale Power is the only firm in the U.S. with an approved SMR design -- at least for now.
Musk's intention to launch data centers into space by 2027 to reduce the AI industry's dependence on terrestrial energy strongly demonstrates how important and valuable this initiative is for SpaceX. But NuScale's approach is arguably more feasible and proven, while targeting roughly the same end-market opportunity.
NuScale isn't the only company looking to scale SMRs. Dozens of companies worldwide are attempting to design and sell SMR systems. But NuScale is one of only three pure-play SMR stocks available to investors, alongside Oklo and Nano Nuclear Energy, making it a unique investment opportunity for energy, AI, and SpaceX investors alike.
