Artificial intelligence’s (AI) rising demand for electricity is sparking a surge in utility stocks, particularly for companies operating nuclear power plants, the New York Times reports.
This trend could even lead to the reopening of the Three Mile Island nuclear facility, known for the worst nuclear disaster in US history, according to industry experts.
While Nvidia, a leading chipmaker, has become the obvious stock market favorite due to its crucial role in AI, some investors are turning to less obvious options: utilities that provide power to AI data centers. Companies like Constellation Energy and Vistra, which operate nuclear plants, have emerged as top performers in the S&P 500, with returns exceeding 30% in September.
Constellation Energy, the largest nuclear plant operator in the US, saw a significant boost after signing a deal on September 20 to supply energy from Three Mile Island to Microsoft’s expanding AI data centers. The deal marks a surprising turnaround for the facility, which was partially shut down five years ago. The company plans to reopen the undamaged portion of the plant, renaming it the Crane Clean Energy Center.
Other utilities, including Talen Energy and Vistra, have also entered similar partnerships with AI operators. Talen, for instance, agreed to supply Amazon’s AI operations with power from its nuclear plant in Pennsylvania. These deals highlight the growing intersection of AI and nuclear energy, driven by AI’s insatiable need for vast amounts of electricity.
Nuclear power, long a controversial energy source, is now experiencing a resurgence due to AI’s energy requirements. Additional dormant nuclear plants, such as Michigan’s Palisades plant and Iowa’s Duane Arnold plant, are being considered for reactivation. This process is expensive and requires regulatory approval, but the potential rewards are drawing interest.
While nuclear energy is low in carbon emissions, it faces significant challenges, including the production of radioactive waste and the high costs of reactivation. However, with the growing demand for electricity from AI data centers outstripping the capacity of renewable sources like wind and solar, old nuclear and even coal-fired plants are finding new life.
The boom in utility stocks tied to nuclear energy is linked directly to the rapid expansion of AI. AI supercomputers, which power tools like chatbots, consume massive amounts of energy for both training algorithms and processing searches. According to researchers, a single query to an AI system like ChatGPT can use as much electricity as lighting a bulb for 20 minutes.
Despite skepticism about AI’s long-term profitability, investors are increasingly looking at utilities as an alternative bet on the future of AI. While the outlook for both AI and nuclear power remains uncertain, this emerging energy trade shows how AI’s energy demands are reshaping industries and stock market dynamics.
