By Adam Clark
The growth of artificial intelligence is set to cause a corresponding surge in the need for energy to power data centers. Amazon.com is turning to nuclear energy as the answer.
The deployment of AI is causing the construction of a wave of new data centers, housing servers powered by processors which are becoming ever more power hungry. Data centers are set to make up 8% of total U.S. power demand by 2030 from about 3% currently, according to a Goldman Sachs analysis.
Amazon is planning to spend more than $100 billion over the next decade on data centers as it competes with Microsoft and Alphabet's Google. Data center operators want reliable 24/7 power and clean energy. That means nuclear fits the bill better than polluting fossil fuels or potentially intermittent renewable energy.
Amazon's cloud-computing unit is nearing a deal for electricity supplied from a nuclear plant on the East Coast with Constellation Energy, The Wall Street Journal reported on Monday, citing people familiar with the matter. That's just one example of talks being held between the owners of roughly a third of U.S. nuclear power plants and technology companies to provide electricity to new data centers.
The trend is one that Barron's explored earlier this year, noting Constellation Energy, Vistra, Talen Energy and Public Service Enterprise Group as potential beneficiaries, although each company's stocks have subsequently climbed.
The cloud-computing operators are exploring different ways to secure nuclear power. In March, Amazon purchased a nuclear-powered data center in Pennsylvania for $650 million from Talen. Meanwhile, Microsoft this year hired a director of nuclear technologies to develop small-scale atomic reactors.
"Constellation is the largest unregulated nuclear generator and is the best positioned, in our estimation, to have the opportunity to enter into similar agreements," wrote UBS analyst William Appicelli in a recent research note.
Appicelli has a Buy rating and a $249 price target on Constellation stock.
Constellation shares were up 1.6% at $203.56 in premarket trading on Monday.
Write to Adam Clark at adam.clark@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
July 01, 2024 08:35 ET (12:35 GMT)
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