The AI industry is bringing explosive growth in electricity demand, as renewable energy can no longer meet the insane expansion of Datacenters. In this context, industry giants are turning to nuclear power. As various American tech giants sign nuclear power agreements to meet the electricity demands of AI, the nuclear energy sector has become one of the key investment directions for AI, with Analysts also beginning to envision an optimistic outlook for the industry.

In this regard, Ken Griffin, founder and CEO of Citadel Securities, who surpassed Bridgewater in 2022 to top the 'Hedge Fund King' ranking, stated: 'I have invested in nuclear energy; it is the future of the AI era.'

AI is consuming electricity at an alarming rate.

With the rise of AI, the electricity demand of Datacenters has greatly increased. HSBC released a research report indicating that according to data released by EPRI in May of this year, by 2030, Datacenters may consume 9% of the electricity in the USA, more than twice the current amount. Future electricity scarcity is likely to become inevitable, hence some tech giants are exploring new power supply options and have set their sights on nuclear energy.

On November 23, media reported that in Pittsburgh, Pennsylvania, USA, the electricity demand required for running AI and Cloud Computing surged significantly, with a single Datacenter consuming approximately double the amount of electricity used by residents last year—potentially exceeding the total power consumption of an entire city or even an entire state soon.

According to data from the US Department of Energy and the Census Bureau, media analysis concluded that the power consumption of a peak demand of 1 gigawatt for a Datacenter is equivalent to about 0.7 million households' annual electricity usage, or the total electricity consumption of a city with a population of about 1.8 million. Even with lower peak demand, a gigawatt-level Datacenter's electricity consumption is still roughly equivalent to about 0.33 million households' annual electricity usage, or the total electricity consumption of a city with a population over 0.8 million—approximately the population of the entire San Francisco.

In March of this year, 34 countries, including the USA, committed to using this agreement to reduce dependence on fossil fuels. According to the International Energy Agency (IEA) report 'Electricity 2024', as new reactors begin commercial operations in many markets, including China, the USA, India, Japan, South Korea, and Europe, global nuclear power generation is expected to reach a historic high in 2025, surpassing the record set in 2021.

According to data from the Boston Consulting Group, the average size of a single Datacenter operated by major Technology companies is currently about 40 megawatts, but in the future, campus sizes of 250 megawatts or larger will emerge. Analysts expect that between 2030 and the middle of 2040, more and more Datacenters of 500 megawatts or larger will appear in the USA.

At the end of October, one of the most stressed local electrical grids in the USA is$CenterPoint Energy (CNP.US)$discovered that in just a few months, requests from Datacenter developers for connections to its utility company in the Houston area increased by 700%. CenterPoint Energy CEO Jason Wells stated during an Earnings Reports call with Analysts that the Datacenter queue capacity for the Greater Houston area's utility company has increased from 1 GW before summer to now 8 GW.

Technology giants are rushing in.

Last week, $Meta Platforms (META.US)$ Meta stated that it is seeking up to 4 gigawatts of new nuclear energy to find a reliable power source for its Datacenters. According to a statement on Tuesday, Meta has requested developers to submit proposals to provide reactor capacity of 1 gigawatt to 4 gigawatts starting in the early 2030s. Commercial nuclear reactors can produce about 1 gigawatt of electricity, sufficient to meet the electricity demands of 0.75 million typical households.

This means that Meta has become the latest USA technology giant seeking nuclear energy generation. Before this,$Microsoft (MSFT.US)$、 $Alphabet-C (GOOG.US)$ and$Amazon (AMZN.US)$In recent months, it has signed nuclear energy agreements worth billions of dollars. Technology giants believe that nuclear energy is a stable, low-carbon energy source that can meet the soaring power demands of their datacenters while reducing reliance on fossil fuels, thereby decreasing emissions.

In September of this year,$Oracle (ORCL.US)$The chairman announced plans to design a datacenter powered by nuclear reactors. Microsoft has agreed to purchase electricity from the closed Three Mile Island nuclear plant in Pennsylvania to meet the datacenter's energy consumption, while Amazon has recently purchased a nuclear-powered datacenter in Pennsylvania. In October, Google announced it would explore the use of nuclear energy as a potential green energy source for its datacenters.

As early as June, Microsoft co-founder Bill Gates expressed his intention to invest billions of dollars in a next-generation nuclear power plant project in Wyoming to meet the growing power demands in the USA. Gates' startup, TerraPower LLC, broke ground last week in Wyoming to construct its first commercial reactor, while a coal-fired power plant in the state is closing. Since 2008, TerraPower has been exploring simpler and cheaper reactors and expects to complete the new reactor by 2030.

Global governments are laying out plans.

The growing energy demands fueled by AI technology have sparked strong interest among datacenter operators in finding reliable, carbon-free energy sources. Meanwhile, governments around the globe are actively seeking to transition to nuclear energy.

On October 22, the USA announced it is negotiating with several Southeast Asian countries to deploy small modular reactors. At the beginning of October, Ali Zaidi, the National Climate Advisor of the USA, also stated that the White House is making efforts to restore retired nuclear power plants to help meet the increasing demand for emission-free electricity.

In this context, the Biden-led government is formulating plans to double the USA's nuclear power installed capacity by 2050. According to the roadmap, by the middle of this century, the USA will add 200GW of nuclear power capacity through the construction of new reactors, the reactivation of nuclear power plants, and the upgrading of existing facilities. In the short term, the White House aims to bring 35GW of new capacity online within the next decade.

Meanwhile, Japan is also stepping up. A nuclear power plant closest to the epicenter of the 2011 Japan earthquake is set to restart, marking a significant milestone in Japan's recovery of nuclear energy use. Thirteen years ago, an earthquake and tsunami in northeastern Japan damaged the Onagawa Nuclear Power Plant Unit 2, but it avoided the disaster experienced by the Fukushima Daiichi Nuclear Power Plant further south. The Onagawa Unit 2 reactor is not only the closest reactor to the northeastern earthquake but also the first reactor to be put into operation in eastern Japan, which could become a turning point for the Japanese government's revival of nuclear technology, despite public sensitivity to the issue.

Secondly, the Unit 2 of the Shimane Nuclear Power Plant in Matsue City, Shimane Prefecture, Japan, was restarted around 3 PM local time on the 7th. This marks the first restart of the unit since it entered a regular inspection and ceased operations in January 2012. After nearly 13 years, this nuclear power plant's restart increases the number of operational nuclear power units in Japan to 14.

In addition, the head of the administrative agency in Taiwan has stated that Taiwan is "very open" to using new nuclear technologies to meet the surge in electricity demand from chip manufacturers during the AI boom, marking one of the strongest indications yet that authorities are reconsidering their opposition to reactors.

The outlook for uranium demand is strong, with tightening supply on the horizon.

In nuclear power plants, the reactor is the core component that extracts nuclear energy by controlling the chain reaction of nuclear fission. Technology giants are pouring vast sums into the construction or restart of nuclear reactors. Additionally, recent research indicates that if companies focusing on uranium mining do not scale up the extraction of new mines, the uranium market will soon face a serious supply shortage.

Therefore, aside from nuclear energy, the investment enthusiasm for enriched uranium has basically kept pace with the "AI" trend, which has continued to dominate the capital markets since 2023. Over the past three years, as investors flocked to this commodity and governments from China to Europe plan to build more nuclear power plants, uranium prices have skyrocketed.

As the governments of countries like Japan and Germany revised their plans to phase out nuclear energy, a series of "180-degree turns" in policy have led to a surge in uranium demand. According to the World Nuclear Association, uranium demand from reactors is expected to grow by 28% by 2030 and nearly double by 2040.

Meanwhile, uranium fuel also faces supply-side risks. Russia controls nearly half of the global capacity for separating uranium isotopes needed for reactors and supplied more than a quarter of the enriched uranium to the USA last year. Restrictions on the export of enriched uranium from Russia could pose supply risks for utility companies operating reactors in the USA, which produce nearly one-fifth of the country's electricity.

Jonathan Hinze, president of UxC, which tracks the uranium fuel market, stated that while most deliveries have been completed this year, Russian restrictions may begin to have an impact starting next year. This could result in some reactor operators losing their alternative suppliers. Some utility companies that were expecting to receive enriched uranium may now find it unavailable.

Similar to nuclear power plants, the nuclear fuel supply chain is also receiving some government support. For example, the CEO and President of Canadian uranium metal miner Nuclear Fuels stated that there is substantial government support because the USA is working very hard to rebuild its domestic nuclear fuel supply chain. His company’s strategic positioning is to meet the growing uranium demand in the USA by advancing its uranium projects in Wyoming.

In October of this year, the U.S. Department of Energy signed preliminary contracts with four companies, including General Matter, founded by former SpaceX engineers, seeking to produce high-enriched uranium in the USA, marking the start of a domestic production plan. The U.S. Department of Defense announced that the USA plans to grant $2.7 billion in high-enriched uranium contracts to Congress in the coming years.

In mid-October, the French state-owned company Orano SA also announced that it is increasing its uranium mining and processing capacity, currently facing a tight supply due to rising demand and global efforts to reduce dependence on Russia. Moreover, the company is experiencing production cuts in Niger, and Orano's uranium production in Niger this year will only be 40% of its capacity. Earlier this year, Niger’s military government revoked one of Orano's mining licenses.

Additionally, several small miners located in Namibia and the USA have announced production cuts in the fiscal years 2024 and 2025 due to slower-than-expected production increases, lower ore grades, and local community opposition. JPMorgan noted that these cuts will lead to a total reduction of 2,600 tons of uranium supply in 2024 and 2025, accounting for 4% of the global supply, offsetting the improved production forecasts for 2024 by Canadian uranium trading listed company Cameco due to better mine performance.

Several fund companies are also betting that nuclear energy, traditionally unpopular among eco-friendly investors, will make a comeback. Companies such as Robeco Institutional Asset Management, J O Hambro Capital Management, and JANUS HENDERSON Investors believe that nuclear-related stocks play an important role in their portfolios.

Nuclear power stocks are surging.

Notably, according to a recent analysis by Goldman Sachs of 697 funds with total assets under management exceeding $3 trillion, U.S. fund managers aggressively purchased stocks of nuclear power companies in the third quarter this year to seize the opportunity.

Looking at this year's performance of nuclear power stocks,$NuScale Power (SMR.US)$Has increased nearly 7 times, an emerging nuclear energy company.$NANO Nuclear Energy (NNE.US)$ Has increased nearly 5 times; a power giant.$Vistra Energy (VST.US)$ Has increased nearly 3 times; an independent power company.$Talen Energy (TLN.US)$ Has increased nearly 2 times; backed by nuclear power stocks supported by Altman, the 'father of ChatGPT'. $Oklo Inc (OKLO.US)$ The largest non-carbon Nuclear Power giant in the USA.$Constellation Energy (CEG.US)$Both have doubled.

In this context, the widely popular benchmark in the industry $VanEck Uranium and Nuclear ETF (NLR.US)$ recently reached a historic high, tracking the top Uranium mining and Uranium enrichment companies worldwide. $Global X Uranium ETF (URA.US)$ Also hovering near historical highs. Related concept stocks have also risen: year to date, obtained a 20-year order from Microsoft. $Constellation Energy (CEG.US)$ Increased by over 100%, a Canadian uranium producer.$NexGen Energy (NXE.US)$Increased by over 20%, a US low-grade uranium miner.$Centrus Energy (LEU.US)$Increased by over 30%, another leading uranium mining company.$Uranium Energy (UEC.US)$Increased by more than 26%.

Conclusion

Therefore, as global technology giants and governments accelerate their deployment, the long-term outlook for the nuclear energy Industry remains optimistic. The development of AI is providing new growth points for Nuclear Power demand, and the related GAINIANBANKUAI still has room for upward movement. Analysts point out that the core logic behind this is the global recovery of Nuclear Power on the demand side, bringing sustained demand increments, while the supply side is constrained by strong supply rigidity and low capital expenditure. The rapid surge of related concept stocks also indicates that the market is embracing this sector benefiting from AI technology with real money.

Editor/Rocky