Once sidelined in favor of renewable sources, Goldman Sachs analysts suggest we are in the “early stages of nuclear renaissance in the U.S.”
Growing support from governments and major investments from tech giants like Microsoft Corp. (NYSE:MSFT), Amazon.com Inc (NASDAQ:AMZN), and Alphabet Inc. (NASDAQ:GOOGL) are driving the momentum.
Nuclear Power's Growing Role In Data Center Energy Demand
Goldman Sachs analysts, led by Brian Singer, highlight the mounting pressures of data center power needs, which they estimate will grow 165% by 2030 compared to 2023 levels.
This surge in demand is motivating “Big Tech” to diversify power sources, with a notable shift towards nuclear energy.
“We continue to see Big Tech taking an all-in approach to sourcing power and pursuing low-carbon solutions,” Singer stated.
He added, "While we continue to assume renewables will meet only 40% of data center power demand growth through 2030, we see potential for a significant rise in nuclear's share in the 2030s."
The limitations of renewable energy sources like solar and wind, which require substantial land, have made nuclear a compelling alternative. According to Singer, natural gas and nuclear require a much more modest acreage footprint versus utility-scale solar.
See Also: Solar Is Leaving Wind In The Dust As World Renewable Energy Hits New High
Small Modular Reactors (SMRs) On The Rise
The development of Small Modular Reactors (SMRs), which are more compact and versatile than traditional reactors, is at the center of this nuclear resurgence.
Hyperscale cloud providers, including Google, Amazon, and Microsoft, have already signed multiple contracts for SMR technology, aiming to power their expanding data centers with low-carbon, reliable energy.
"The prospects of more localized, onsite low-carbon reliable power has led to a surge in contracting by hyperscalers to support the development of small modular nuclear reactors,” the analysts wrote.
Beyond SMRs, large-scale nuclear projects are also gaining momentum.
Constellation Energy Corp. (NYSE:CEG) recently announced it would bring back online a dormant unit at the Three Mile Island plant, backed by a "take-or-pay" power contract with Microsoft.
According to the Goldman Sachs report, this could be just the beginning, with "potential for approximately two additional plants to be brought online in the U.S." over the next several years.
"Recognition of accelerated power demand growth from utilities is leading to greater willingness to consider new large-scale reactors," said Singer.
Governments Rethink Nuclear Amidst Energy Security Concerns
The policy landscape around nuclear energy is also shifting as countries worldwide seek stable and sustainable energy sources. "We're seeing greater support by governments across the globe," said Singer.
"Switzerland is reconsidering nuclear, there's bipartisan support in the U.S., and even Australia's opposition party has proposed integrating nuclear into the country's energy mix."
He indicated that at COP28, there was a global agreement to triple nuclear capacity by 2050—a significant signal that the nuclear narrative is changing.
Uranium Sourcing Challenges
Uranium sourcing remains a complex issue, with nearly half of global uranium supply controlled by China, Russia, and Kazakhstan.
In contrast, Europe and the Americas source about 30% of uranium production, hold 56% of conversion capacity, and 41% of enrichment capacity.
"We expect greater clarity on rules and confidence surrounding uranium sourcing will be key to moving forward with a meaningful ramp-up in nuclear generation capacity in the U.S. and Europe," Singer explained.
Cameco Corporation Positioned To Benefit From Nuclear Revival
Among the companies poised to benefit from this nuclear revival, Cameco Corporation (NYSE:CCJ) stands out as the key gainer according to Goldman Sachs.
"We see Cameco's positioning across the entirety of the fuel cycle as a key driver underpinning our constructive view on the stock," said Singer.
Cameco’s operations span mining, conversion, enrichment, and fuel fabrication. Goldman Sachs suggests the company is well-positioned to support both traditional and emerging nuclear energy applications.
The investment bank holds a ‘Buy’ rating on the stock, with a 12-month price target of $61. This implies a 20% rally from current market levels.
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