AI fuels unique energy space
- Nuclear stocks among Wednesday’s biggest gainers
- AI data centers driving energy demand
- MSFT, GOOGL, AMZN announced investments
On a relatively quiet Wednesday morning, three companies from different sectors—one utility, one energy, and one industrial—were among the market’s biggest individual gainers:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
Centrus Energy (LEU), NuScale Power (SMR), and Oklo (OKLO) may not share the same sector, but they’re still in the same business—nuclear energy. Yesterday’s rallies were no coincidence, given news that Amazon (AMZN) was investing half a billion dollars in nuclear reactors1—just a couple of days after a similar announcement from Alphabet (GOOGL), and a few weeks after Microsoft (MSFT) revealed its intentions to go nuclear.
What Amazon, Alphabet, and Microsoft have in common is the need to power their expanding data centers, which are driven by energy-intensive AI. The result, according to Morgan Stanley Research: a potential nuclear renaissance after decades of neglect.2 Currently, nuclear power plants provide roughly 10% of the global electricity supply, a percentage the analysts think could increase to 17% in the next 15 years. Bigger picture, they expect nuclear energy could attract $1.5 trillion in capital investment through 2050.
The following comparison chart shows the degree to which OKLO, SMR, and LEU have outperformed the market since the early-September lows, and especially over the past week or so:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
While the “nuclear renaissance” may be in its early stages, longtime traders tend to be cautious about outsized moves that unfold amid high-profile headlines. While there are never any guarantees, patience is often a virtue in such situations, since large moves often reverse, at least partially, after the headlines fade.
A final, related, note: All three tickers appeared on at least one LiveAction scan for high implied volatility (IV). All else being equal, high IV tends to inflate options prices, which means traders looking to buy options on these stocks may be paying an extra premium.
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1 Associated Press. Amazon, Google Make Dueling Nuclear Investments to Power Data Centers With Clean Energy. 10/16/24.
2 MorganStanley.com. Nuclear Power’s Renaissance. 7/25/24.