The Future of AI Energy might be small and modular: Why NuScale and Oklo Are Still Worth Watching
The energy and tech sectors are unexpectedly colliding, and investors are massing to put the latest developments in perspective. Last weekend, a shocking report from investment bank TD Cowen that caused lots of commotion to the market was published, negatively impacting stocks like C3.ai (NYSE: AI), NuScale Power (NYSE: SMR), and also a tech feather every cap's owner Oracle (NYSE: ORCL). Although the people's immediate reaction has been negative, the positive long-term perspectives for the companies such as Oklo and the like remain. Here's why these companies are still worth your attention—and why the recent news might not be as dire as it seems.
The AI Boom and Its Energy Demands
The rapid growth of artificial intelligence (AI) has caused an unprecedented demand for data centers, which are huge energy consumers. Data centers that could be consuming about 4% of the global electricity consumption by 2030, according to the International Energy Agency (IEA), which is up from about 1% today, [1]. This spike in energy consumption has stressed the importance of the deployment of resilient, low-carbon sources of power—this area is exactly where NuScale and Oklo are directing their efforts. However, the TD Cowen report on Microsoft (NASDAQ: MSFT), which is a significant player in AI and data center infrastructure, provided data concerning the reduction of the scale of the data center expansion project. The tech czar has scratched a few data center contracts from the list, pointing out quality building problems and little access to energy sources [2]. At first, it seemed like a big hiccup for investors, but it is fundamental to point out that the increased energy consumption associated with AI is real, and the industry is still in the stage of searching for sustainable solutions.
The AI Revolution is being affected by the contribution of NuScale
NuScale Power, which is a leader in small modular reactor (SMR) technology, has a very advantageous position to meet the requirements for servers of data centers. SMRs are designed to be scalable, cost-effective, and capable of providing reliable baseload power—making them an ideal match for energy-intensive industries like AI. Notwithstanding the temporary fall in NuScale’s stock price followed by the TD Cowen report, the company’s long-term prospects are solid. The global SMR market is projected to grow at a compound annual growth rate (CAGR) of 15.8% from 2023 to 2030, and so it is expected that it will be of $18.8 billion value [3]. NuScale’s partnerships with industry leaders and government agencies, such as the U.S. Department of Energy (DOE), cement its standing as a key figure in the energy transmutation [4].
Oklo’s Microreactors: A Game-Changer for Remote Data Centers
Unlike NuScale, which concentrates on SMRs, Oklo is leading microreactor technology that could dramatically transform energy access for remote and off-grid data centers. Oklo’s microreactors are small, do not require refueling for up to 10 years, and are very environmentally friendly [5]. These advantages make them an interesting option for firms that want to energize data centers in areas that are hard to reach and therefore have little infrastructure. Microsoft and other tech giants having recently scaled back their data center extension plans should not be associated with Oklo's technology potential, but rather focus on the need for alternative energy solutions that are flexible in the evolving AI industry.
The Broader Energy Transition: A Tailwind for Nuclear Innovation
The world’s efforts to decrease carbon emissions are playing into the hands of new nuclear technology to the environment that would provide clean and reliable energy. As per the International Atomic Energy Agency (IAEA), net-zero emissions by 2050 cannot be achieved unless the global nuclear capacity is doubled [6]. This represents an enormous potential for the likes of NuScale and Oklo who are at the forefront of nuclear innovation. Public support for advanced nuclear reactors is also increasing the U.S. Department of Energy (DOE) has given $600 million to NuScale and other small modular reactor (SMR) developers through the funding, supporting a long-term commitment to nuclear energy as part of the clean energy transition [7].
Why Oracle’s Role in AI Matters
Although the TDCowen report may have introduced volatility to Oracle’s shares initially, its partnership with OpenAI and SoftBank on the $500 billion Stargate AI project proves that it is a major market player in the AI sector as well [8]. Oracle’s data centers potential as the AI workload support facility is not the priority of the other tech giants in their short-term cutback [9]. Notably though, the company's valuation—trading at 41 times earnings and nearly 9 times trailing sales—could be a cause of the hesitation among some potential investors [9]. Thus, while Oracle looks good in the long run, its high valuation may stand in the way of its potential short-term upside.
The Bigger Picture: A Trillion-Dollar Opportunity
The marriage of AI and energy is a trillion-dollar opportunity for the equities market. As per the Grand View Research, the global nuclear power market will touch $61.3 billion by 2030, triggered by low-carbon energy demand [10]. Companies like NuScale and Oklo are well-positioned to take advantage of these developments, offering solutions that cover the energy needs for the AI revolution .
Why Now is the Time to Stay the Course
Even though the TD Cowen report might be the reason for short-term volatility, the long run fundamentals that are the basis for the energy transition still remain. The clean and renewable energy sector will only see further growth due to the advent of green energy and AI technologies. Moreover, NuScale and Oklo are company stocks for you to consider since they are pioneering technologies which will play vital roles in the energy sector of the future. The recent market reaction might have given some smart potential investors the ability to move beyond the publications and see the opportunity to buy.
Final Thoughts
Investing in the businesses like NuScale and Oklo is not just about getting return on your investment—you are also contributing to a more sustainable future. They are the ones developing pioneering technologies which might turn out to be the game changers in the energy sector, the reduction of carbon emissions, and the driving of the AI revolution. As with any investment, there are risks, but the potential rewards are great. The energy sector is changing, and those who come to the front of this revolution are the ones who will get the most of it. The future of energy is small, modular, and nuclear-- and Still is here.
References
International Energy Agency (IEA). (2023). Data Centres and Data Transmission Networks. Retrieved from https://www.iea.org
TD Cowen. (2024). Microsoft Data Center Leases Report.
Grand View Research. (2023). Small Modular Reactor Market Size, Share & Trends Analysis Report. Retrieved from https://www.grandviewresearch.com
U.S. Department of Energy (DOE). (2023). Funding for Advanced Nuclear Technologies. Retrieved from https://www.energy.gov
Oklo Inc. (n.d.). Microreactor Technology. Retrieved from https://www.oklo.com
International Atomic Energy Agency (IAEA). (2021). Net Zero by 2050: A Roadmap for the Global Energy Sector. Retrieved from https://www.iaea.org
NuScale Power. (2023). Strategic Partnerships. Retrieved from https://www.nuscalepower.com
Oracle. (2024). Stargate AI Project Announcement. Retrieved from https://www.oracle.com
The Motley Fool. (2024). Oracle Stock Analysis. Retrieved from https://www.fool.com
Grand View Research. (2023). Nuclear Energy Market Size, Share & Trends Analysis Report. Retrieved from https://www.grandviewresearch.com