In today’s Finshots, we explain why Big Tech is betting on nuclear power and the big changes it could be driving.
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The Story
AI is changing the world in ways we couldn’t have imagined. But there’s a secret it’s keeping — its massive appetite for electricity.
Last year, AI alone gobbled up 4% of all electricity in the US, and by the end of the decade, that could shoot up to 9%.1 And with the power demand only surging, this is a problem we can’t ignore.
Now if you were to trace this energy consumption, you’ll find one word to blame this power surge on — data centres. Specifically, hyperscale data centres run by tech giants like Microsoft, Google, Amazon and OpenAI. These companies are the beating heart of AI but they are also responsible for 60-70% of all energy data centres use.1
To understand how this works, picture a massive room filled with computers, running 24/7, storing data, analysing it and making decisions. And to keep them from overheating, you need serious cooling. So technically, it’s like running a room full of ovens which need a lot of fans and air conditioning to make sure nothing catches fire. That’s the kind of power we’re talking about.
But mix AI with power, and you’ve got two serious issues to tackle. The first one is that AI is growing at breakneck speed. And the US is leading this growth, housing half of the world’s data centres — over 5,000 of them.2 And thanks to cloud computing which grows with AI; by 2030, the energy demand for these data centres is expected to triple.3
The second problem is emissions. If Big Tech needs to stay ahead in the AI race, it needs more data centres, which means more energy consumption. And that’s sort of complicating things because it has big promises to hit net-zero emissions by 2030.
So it’s turning to an unexpected old friend — nuclear power.
First up, we have Microsoft which is teaming up with partners to reopen nuclear facilities and ensure a steady power supply for its data centres. Then there’s Google, striking deals with startups to roll out small modular reactors. Amazon is also getting in on the action too, investing a whopping $500 million in nuclear-powered data centres. Clearly, Big Tech is betting big on nuclear energy.
But why nuclear, you ask?
Well, it all boils down to reliability. Nuclear reactors, particularly fission reactors, are workhorses of power generation. That’s because they generate energy by splitting atoms into smaller parts, producing a significant amount of energy that can run continuously for years, maintaining over 90% capacity, unlike solar or wind, which are at the mercy of the weather. That makes it a dependable choice for data centres that need a steady stream of energy 24/7. Besides, when you consider the costs of batteries needed to store renewable energy for those non-sunny or calm days, nuclear energy often comes out cheaper in the long run.
So, you could think of nuclear power like a reliable old car that always starts, even on a cold morning. On the other hand, solar and wind are like flashy sports cars. They’re fantastic when conditions are perfect, but you can’t always count on them. And that’s precisely why nuclear energy seems to be the steady, trustworthy option for tech companies that require constant power.
But if you go back in history, you might uncover a different story altogether. Nuclear energy hasn’t always had the best reputation. In fact, it’s often seen as a risky choice or one that can pose serious dangers and even take lives. For context, the US was once a nuclear powerhouse, leading the world in nuclear fuel exports. Over time though, it took a significant step back. The country went from mining uranium, crucial for fueling nuclear reactors, domestically to becoming the largest importer.
And fears of nuclear disasters like Chernobyl led to a halt on new nuclear projects, resulting in just 94 operational reactors today, down from a peak of 112 in 1990.
Cut to today, nuclear power contributes to about 20% of all electricity in the US. So, what changed?
Enter Small Modular Reactors (SMRs), which are giving nuclear energy a fresh new look. These smaller, supposedly safer reactors are not only easier to build but also come with a host of advantages. Imagine them as small, sturdy Lego blocks or components that can be manufactured in a factory and then assembled closer to where power is needed. This reduces safety risks compared to their larger, more complex predecessors.
And that’s also why companies like Google are ramping up efforts to build these reactors to fuel their AI ambitions, while Amazon is making significant investments in Virginia to power its data centres. This renewed focus is igniting significant changes in economies, major corporations and innovations themselves.
The buzz around nuclear energy has already sent US nuclear stocks soaring. Just look at NuScale Power, a company specialising in SMRs. Its stock has skyrocketed more than five times this year. Uranium prices are also reaching 15-year highs, benefitting companies like Cameco and NexGen that mine this crucial resource.3
And it’s not just happening in the US. If you shift your focus to India, you’ll see that it aims to triple its nuclear power capacity to 22,480 MW by 2032, with a goal of deriving 25% of its electricity from nuclear sources by 2050.
This ambitious drive is prompting significant investments, with power companies getting in on the action too. To put things in perspective, REC (Rural Electrification Corporation) plans to allocate ₹6 trillion to renewable and nuclear projects by 2030. NTPC is partnering with NPCIL (Nuclear Power Corporation of India) to form Anushakti Vidhyut Nigam, focusing on building and operating nuclear power plants. Add to this the fact that India plans to establish 10 new reactors and collaborate with private players to explore SMRs and innovate in nuclear technologies, and you’ll see how SMRs are changing perceptions of nuclear energy altogether.
And that might simply paint a rosy picture and make it seem like nuclear energy is a magic bullet that could help Big Tech give their AI dreams more wings while also minimising climate impact.
But let’s be real. It’s not that simple. There’s only a limited number of unused or inactive nuclear plants ready for a comeback, and building new reactors, whether they’re SMRs or not, comes with its own set of challenges.
You’ve got regulatory hurdles, engineering headaches and the tricky public perception to navigate. Plus, these new designs might still face hefty costs similar to larger units just to get the green light from regulators, especially in a field where safety is a top priority.4
And here’s another thing you can’t ignore. Investing in SMRs could divert funds away from tried and tested options like solar, wind and battery power systems. On the flip side, SMRs are a bit of an unknown because they’re still unproven.
But what's innovation without tackling tough problems, right?
While the stakes are high, the potential is game-changing. And that could spark a simple hope for more nuclear breakthroughs rather than repeats of past disasters.
So yeah, maybe, just maybe, nuclear power can step into the spotlight without the shadow of doom and gloom headlines.
Until then…
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Story Sources: TechCrunch [1], Sherwood [2], Economic Times [3], Financial Times [4]
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