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The energy needs of data centres are exploding, particularly with the growth of artificial intelligence (AI). As renewable sources like solar and wind are intermittently available, nuclear energy has emerged as the leading solution for large tech companies looking for reliable, clean power to sustain data centres 24/7. However, the push toward nuclear energy, specifically through Small Modular Reactors (SMRs), carries significant risks. ABSI this week will analyse why tech leaders are increasingly going nuclear in order to power their AI dreams. 

It has been an exciting month for nuclear enthusiasts and uranium investors alike with a number of major tech firms all signalling their intention to join the nuclear race in order to power data centres that will host next-generation AI technology. Microsoft kicked things off with an announcement that it signed a 20-year power purchase agreement (PPA) with Constellation Energy to allow them to restart Unit 1 of the decommissioned Three Mile Island nuclear power station. Google then followed suit partnering with SMR technology developer Kairos Power for 500MW of nuclear power from 6 or 7 SMR reactors which are slated to go online starting from 2030. Finally, Amazon jumped into the race last week announcing it would anchor a fundraise for nuclear developer X-energy to help finance the development and licensing of SMRs following the acquisition of a nuclear-powered data centre from Talen Energy earlier in the year.

Source: Forbes

These nuclear moves from the biggest data centre operators in the world make sense given the rise of AI has dramatically increased the energy consumption of data centres. By 2030, AI and data centres are expected to consume as much as 9% of global electricity, up from 3-4% today. As a result, infrastructure operators are under pressure to secure reliable, zero-emission, round-the-clock power to keep their operations running smoothly. Wind and solar, while crucial to the clean energy transition, are variable—requiring backup systems like batteries to ensure uninterrupted service.

Nuclear energy, particularly SMRs, offers an attractive alternative. Unlike renewables, nuclear provides consistent, baseload power, meaning it can deliver electricity continuously without fluctuations. This reliability is essential to power data centres 24/7. Moreover, SMRs have been hailed as the future of nuclear energy because they are smaller, more affordable, and faster to build than traditional nuclear reactors.

Nuclear proponents have been toasting the news as vindication against anti-nuclear interests. However, before popping the champagne, it is important to note the devil in the details of these recent announcements. 

To start, the Microsoft deal is a PPA only, meaning they will not be investing any money upfront, just guaranteeing 100% of the offtake at an agreed-upon price. Constellation will need to front the US$1.6 billion to restart the plant and will need regulatory approval which may not be an easy task given Three Mile Island is the location of the only nuclear meltdown in US history at Unit 2 of the site. While I believe the budget and timeline of 2028 are extremely optimistic, this project has the lowest risk given it is an existing asset using proven, albeit outdated, large-scale nuclear technology. 

Google and Amazon are going down a slightly different route by backing SMR technology and looking to develop nuclear assets from scratch. The problem with this option is that there are currently zero SMR plants in operation in the US and only a small number globally. Continually, neither Kairos Power or X-energy have a design that has been approved by the regulator for construction. NuScale Power is the only US company to have an approved design for an SMR but its first project ended in disaster.

In 2014, NuScale announced the Carbon Free Power Project (CFPP) which would build the first US SMR in Utah. Initially the CFPP promised a competitive US$58/MWh price but due to cost overruns, the proposed power price increased to US$89/MWh, even with government subsidies. This made the project unviable and it was ultimately cancelled in 2023. 

Herein lies the problem for Google and Amazon, due to the nascent nature of the technology, the huge licensing and regulatory burden in the US, and the negative public perception of nuclear energy, it will be extremely difficult for them to get these projects online in the time and budget proposed. Kairos has indicated that the first Google reactor will be ready in 2030 which is farfetched given they have yet to achieve regulatory approval for their designs which require the construction of a 50MW demonstration reactor. This began construction in July 2024 and is slated for completion by 2027. Given the history of other projects, my estimate is that this deadline will shift and it won’t be completed until at least 2030.

Source: Lazard

But what is the alternative?

These major tech firms are between a rock and a hard place as they need to meet rapidly growing energy needs while reducing their carbon footprint. Nuclear offers the promise of baseload clean energy but the technology is riddled with regulatory burden and technology teething pains. Traditional renewables, such as wind and solar, are much cheaper options but the uncertainty of its variability is unacceptable, even with large-scale battery backup. Other countries are using biomass and waste-to-energy to provide baseload power but while these options can be “carbon neutral”, they’re not zero-carbon solutions. 

The decision to go nuclear is a roll of the dice for these tech firms. If successful, they could secure a long-term, low-carbon energy source that powers their AI-driven future. But if the historical risks materialise, they might find themselves burdened with expensive, delayed projects that offer little return on investment—just as cheaper, more flexible renewable options come online.

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