Google’s Nuclear Deal Points to a Promising New Group of Stocks
As the demand for nuclear power surges, companies operating nuclear reactors have emerged as significant beneficiaries this year. Leading this surge are companies like Constellation Energy and Vistra, whose stock prices have more than doubled over the past months. However, a new group of nuclear stocks focused on innovative reactor technologies is beginning to gain traction, potentially marking the start of a significant shift in the energy landscape. Key players in this emerging sector include NuScale Power, Oklo, BWX Technologies, and Centrus Energy. The ascent of these companies is poised for further acceleration, particularly following Google’s recent announcement.
Google’s Strategic Move into Nuclear Energy
On Monday, Alphabet’s Google disclosed a partnership with Kairos Power, a California-based developer of nuclear reactors. While financial details of the agreement were not disclosed, Kairos anticipates launching its first reactor by 2030 and potentially constructing several more by 2035. This collaboration places Google among a growing list of tech companies that are turning to nuclear energy to meet their escalating electricity needs for data centers that underpin artificial intelligence applications.
This trend is part of a broader strategy that has seen companies like Microsoft partner with Constellation Energy for power sourced from nuclear plants, including a contract with a reactor at the infamous Three Mile Island plant. While these reactors are not newly constructed, Google’s effort represents a significant step toward the development of completely new reactors.
Renaissance in Nuclear Technology
According to Michael Underhill, chief investment officer of Capital Innovations, the announcement marks the dawn of a nuclear renaissance, especially as he states, “Artificial intelligence will not happen without nuclear power.” Underhill believes this development is only the beginning, indicating we are in the “first inning” of this transformative era.
The Rise of Small Modular Reactors (SMRs)
Kairos Power is one of several companies developing Small Modular Reactors (SMRs). These innovative reactors are designed to be constructed more quickly and efficiently than traditional reactors, which typically generate around 1,000 megawatts of power—sufficient to power over 500,000 homes. In contrast, SMRs are designed to have outputs of less than 300 megawatts, with Kairos’ reactors specifically targeting a capacity of 75 megawatts.
The modular nature of these reactors allows for them to be manufactured in sections in factories and then transported to construction sites. Additionally, many SMRs employ different fuel and cooling systems compared to existing reactors, utilizing advanced technologies such as Kairos’ ceramic “pebble-type” fuel and molten salt cooling system, which enables operation at lower pressures.
The Regulatory Landscape and Investment Opportunities
As companies innovate in the SMR space, they also face regulatory challenges. Kairos currently possesses a construction permit for a test reactor in Tennessee, with further permits needed for commercial reactors tied to Google’s agreement. Other players in this market include Terrapower, founded by Bill Gates, which is also developing reactors utilizing molten salt technology.
Investors looking to engage in this lucrative space may have limited options. Notably, many prominent SMR companies, such as Kairos and Terrapower, are privately held. However, publicly traded SMR developers are available, with Oklo making strides after completing a SPAC merger earlier this year, despite experiencing stock volatility.
Surge in Stock Values
Despite its challenges, Oklo’s stock recently gained 20% amid rising enthusiasm for nuclear power. Another player, NuScale, has recently experienced a significant stock rebound, quadrupling in value due to positive news surrounding SMR development. Other major players in the sector include Westinghouse, owned by Brookfield Asset Management and Cameco, along with the nuclear equipment provider BWX Technologies, engaged in SMR development.
Investing in Uranium and Global Players
Investors might also consider uranium-related investments as they play an essential role in the nuclear power supply chain. Leading uranium mining companies include Cameco, alongside NexGen Energy and Uranium Energy. Alongside these, Centrus Energy specializes in uranium enrichment, a crucial service as the United States seeks to minimize its reliance on Russian uranium imports.
With initiatives to enhance domestic uranium capabilities underway, Centrus is also catering to SMR developers by supplying High-assay low-enriched uranium (HALEU), a new standard for many experimental reactor designs.
Conclusion: A Bright Future for Nuclear Stocks
The future of small modular reactors in the energy market looks promising. While they have a significant journey ahead before becoming a mainstay in the electric grid, the current momentum suggests that several companies will emerge as winners in this evolving landscape. With tech companies like Google investing in nuclear energy, the industry’s revival seems imminent, positioning these new stocks as potential high performers in the coming years.
