Everyone is talking about hyperscalers, data centers, and chip shortages. But the real bottleneck is energy. Today's cutting-edge artificial intelligence (AI) models demand intense computation, gobbling up significantly more energy per server rack than ever before.
According to research from the Electric Power Research Institute (EPRI), data centers account for roughly 5% of electricity use in the United States. But that could increase to 20% by 2035. This massive increase in power consumption has hyperscalers searching high and low for reliable electricity solutions that reduce their carbon footprints.
Enter nuclear energy. Countries worldwide are aiming to triple their nuclear energy capacity by 2050, and the U.S. has ambitious goals to quadruple its capacity over that same period. This is creating some powerful tailwinds for the nuclear industry and innovators in the space, and could mint some of the industrial sector's next big winners.
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These established companies should ride the nuclear wave higher
Nuclear reactors need fuel, and Cameco (CCJ -2.53%) is one of the world's top uranium miners. Based in Canada, Cameco is a leading Western uranium miner with high-grade uranium mines in Saskatchewan. The company also holds a minority stake in Joint Venture Inkai in Kazakhstan, along with Westinghouse Electric, one of the world's top nuclear reactor manufacturers -- providing Cameco with upside from both raw fuel demand and the build-out of nuclear infrastructure.
Moving downstream, several companies are developing advanced nuclear reactors, also known as small modular reactors (SMRs), which could address major headaches associated with nuclear energy. SMRs are modular nuclear power solutions that are factory-fabricated and then shipped for on-site assembly. These units are flexible and could bring power to remote sites or for hyperscalers seeking "behind the grid" solutions.
GE Vernova (GEV +0.00%) is riding energy trends higher, driven by historic demand for its gas turbine equipment. That said, its offerings span a variety of power equipment. Regarding SMRs, GE Vernova is working with Hitachi to develop and commercialize the BWRX-300. This SMR is currently the only one under construction in North America, at Ontario Power Generation's Darlington site, which is slated to open by 2029.
NYSE: GEV
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In addition, the U.S. Department of Energy awarded the Tennessee Valley Authority a $400 million grant to accelerate the licensing and deployment of the BWRX-300. GE Vernova expects the BWRX-300 to begin commercial operations at Clinch River in the early 2030s, making it the first operating SMR in the U.S.
These speculative stocks are high-risk, high-reward opportunities
For more speculative investors, Oklo (OKLO -5.03%) and NuScale Power (SMR -0.65%) are two early-stage, pre-revenue SMR developers. These companies are still establishing themselves and are looking to lock in commercial agreements for their technology, which is set to be deployed in the 2030s. Oklo has an agreement with Meta Platforms, while NuScale has one project in Romania and hopes to secure another deal with the Tennessee Valley Authority.
NYSE: OKLO
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Finally, these SMRs need fuel, and that's where Centrus Energy (LEU -1.80%) comes into play. Centrus is the only company approved by the Nuclear Regulatory Commission in the U.S. to manufacture high-assay low-enriched uranium (HALEU), the fuel used in many of the next-generation reactors, including SMRs, microreactors, and others under development.
Centrus also provides low-enriched uranium (LEU), the fuel used by traditional nuclear power plants. The company has traditionally sourced this uranium internationally, including from Russia. Under the Prohibiting Russian Uranium Imports Act, U.S. companies must replace their Russian-sourced nuclear fuel. Centrus received $900 million from the Department of Energy to expand its uranium enrichment facility in Piketon, Ohio, with new capacity coming online by 2029.
NYSE: LEU
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This unstoppable trend could persist for decades
Nuclear energy is set to enjoy tailwinds that could span the next couple of decades. Data centers have an insatiable appetite for power, while governments worldwide are significantly increasing nuclear capacity.
Meanwhile, the U.S. and others are investing heavily in next-generation reactors and the fuel needed to power them. This makes nuclear stocks appealing to investors seeking the industrial sector's biggest winners in the coming decade.
