To The Moon

Companies are betting big on nuclear energy to power AI.

We are entering a nuclear energy generation renaissance. Companies and governments around the world are building and restarting nuclear power plants after realizing they are perfect for the growth in electricity demand that is coming from artificial intelligence (AI) and electric cars. It is curious that environmental groups have opposed nuclear energy for decades despite the fact that it produces nearly zero carbon emissions after construction. However, it looks like the world is finally on the same page in regard to the usefulness of this energy type.

Tens of billions are going to be spent on nuclear power in the next few decades, but there are few publicly traded nuclear energy stocks one can buy.

Growth in demand due to electrification and AI

It is important to understand why there is a growing demand for nuclear energy -- it's mainly coming from two areas that require a lot of electricity. First is electric cars. Electric vehicles are now 19% of new automotive sales in the United States, up from basically zero a decade ago. This is a huge transition for the automotive market, which will transition the power source from gasoline to electricity, meaning the sector will eat up more and more electric power generation in the years to come.

The second factor is the growing size of the data center market in the United States. Supercharged by the demand for AI, spending on data centers is growing rapidly and is expected to hit 9.1% of U.S. electricity consumption by 2030. There's no reason this needs to stop in 2030, either. Large companies that will need this electricity are seeing the writing on the wall and looking for more electricity sources than intermittent wind and solar power. For example, Microsoft and Amazon -- the two largest data center providers -- are signing long-term deals to help electric utilities build or restart nuclear power plants.

Nuclear power plants are costly and custom-built, and they take a lot of time to get up and running.

It has already been a year of good news for nuclear stocks, thanks largely to the AI boom, which investors expect to drive demand for energy. Nuclear power, which accounts for about 18% of electricity capacity, has a far smaller carbon footprint than coal or gas. And it’s more consistent than other green sources like solar and wind.

The demand for electricity from AI is additional to that coming from the already fast buildouts of traditional cloud servers. In other words, while nuclear power stocks seem to have ridden AI’s tailcoats upward, investors aren’t hanging on every AI worry.

Some Nuclear power stocks had up over 300% this year, However, there is a lot of potential downside that they may be forgetting right now, and that is how investors can get in trouble.