We are entering a nuclear energy generation renaissance. Companies and governments around the world are building and restarting nuclear power plants after realizing they are perfect for the growth in electricity demand that is coming from artificial intelligence (AI) and electric cars. It is curious that environmental groups have opposed nuclear energy for decades despite the fact that it produces nearly zero carbon emissions after construction. However, it looks like the world is finally on the same page in regard to the usefulness of this energy type.
Tens of billions are going to be spent on nuclear power in the next few decades, but there are few publicly traded nuclear energy stocks one can buy. One, NuScale Power Corp (NYSE: SMR), plans to disrupt the market with its new small modular reactors (SMRs). Its shares are up close to 500% this year as investors pile into the nuclear energy trade. Should you follow them and buy some shares yourself?
It is important to understand why there is a growing demand for nuclear energy -- it's mainly coming from two areas that require a lot of electricity. First is electric cars. Electric vehicles are now 19% of new automotive sales in the United States, up from basically zero a decade ago. This is a huge transition for the automotive market, which will transition the power source from gasoline to electricity, meaning the sector will eat up more and more electric power generation in the years to come.
The second factor is the growing size of the data center market in the United States. Supercharged by the demand for AI, spending on data centers is growing rapidly and is expected to hit 9.1% of U.S. electricity consumption by 2030. There's no reason this needs to stop in 2030, either. Large companies that will need this electricity are seeing the writing on the wall and looking for more electricity sources than intermittent wind and solar power. For example, Microsoft and Amazon -- the two largest data center providers -- are signing long-term deals to help electric utilities build or restart nuclear power plants.
This leads us to NuScale Power. The company is aiming to help alleviate some of the pain points in nuclear power with its SMR technology. Nuclear power plants are typically costly and custom-built, and they take a lot of time to get up and running. SMRs (at least in theory) will be smaller reactors with a repeatable process. This makes them cheaper, scalable, and hopefully quicker to market once all the regulatory approvals come through. If nuclear energy transitions to SMRs and NuScale Power is the leading provider, there will be close to limitless demand for its products.