How to Satisfy Big Tech's Energy Craving

Big Tech companies are in fierce competition to become AI leaders...

That's why they're rapidly building massive data centers to support booming demand. And to run those data centers like clockwork, they have one crucial requirement... energy.

To meet their energy needs, these companies are turning to cleaner sources. But solar and wind aren't yet reliable enough. So Big Tech is coming around to a long-ignored alternative...

I'm talking about nuclear power.

In September, software giant Microsoft (MSFT) teamed up with asset manager BlackRock (BLK) and other investors... to launch a $30 billion investment fund for AI-related nuclear projects.

Microsoft Vice Chair and President Brad Smith said that, combined with debt, the fund's power could reach $100 billion. He hinted that many similar funds might emerge soon.

And that's only one example. Tech companies are pouring billions of dollars into the nuclear-power industry.

This could be a pivotal step toward broader acceptance of nuclear energy in the U.S. It's getting faster and easier to launch nuclear projects than ever before. But for this energy source to really gain ground, we have to solve a big problem...

All of our nuclear power plants are old...

More than half of the world's nuclear power capacity is now more than 36 years old.

That's largely due to tragic events like the Three Mile Island and Chernobyl accidents, which caused the world to halt the bulk of nuclear investments.

It will take a lot of money to upgrade this aging infrastructure. And that's not even the biggest issue...

You see, it takes too long to get a nuclear plant up and running. Between zoning and regulatory approvals... and substantial investment and construction timelines... any new plant likely won't come online for at least a decade.

Because of all these challenges, a different type of nuclear power plant is stepping into the spotlight – small modular reactors ("SMRs").

SMRs are more compact, cheaper, and faster to construct than conventional reactors. They're also getting more and more common in the United States.

Just last month, industry titan Google partnered with Kairos Power – a prominent developer of SMRs.

And according to the World Nuclear Association, the U.S. currently leads the way in planned and under-construction SMR projects, with around 30 projects.

That amounts to nearly one-third of the world total.

SMRs hold a clear advantage over conventional plants in pace and simplicity...

That said, constructing even the smallest SMR requires a vast amount of materials, equipment, and skilled labor hours.

In other words, this is still a long and complex process. It's not something that can happen overnight.

SMRs are one of the best ways to produce enough energy to power the AI race. So it's no surprise that Big Tech companies are racing to spend even more on nuclear power.

It's yet another reason we'll keep seeing plenty of infrastructure spending... further fueling the supply-chain supercycle that has been underway for years.

Regards,

Joel Litman
November 7, 2024