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Amazon’s Bold Move into Nuclear Energy: What It Means for Top Stocks in 2024

Hannah Perry | October 17, 2024

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Amazon Makes Fresh Nuclear Bet: Implications for Hottest Stocks of 2024

Tech Giants Entering the Nuclear Energy Sphere

In a trend that is rapidly gaining momentum, tech companies are venturing into the realm of nuclear energy, particularly focusing on the construction of small modular reactors (SMRs). Following Alphabet Inc.’s recent foray into nuclear energy, Amazon (AMZN) has announced its commitment to support the development of SMRs. This move could potentially have significant implications for nuclear stocks, which have experienced remarkable growth in 2024.

Amazon already had an existing collaboration with Talen Energy Corp. (TLN) for a current nuclear reactor. However, in a bold step on Wednesday, the company expanded its nuclear ambitions by pledging its support for building new SMRs in partnership with various stakeholders. As stated in a blog post by Amazon, “SMRs are an advanced kind of nuclear reactor with a smaller physical footprint, allowing them to be built closer to the grid. They also have faster build times than traditional reactors, allowing them to come online sooner.”

Market Implications and Stock surges

This strategic commitment from Amazon comes at a time when nuclear stocks are notably some of the biggest gainers this year. The collaboration will not only bolster the company’s energy portfolio but also set the stage for enhanced investments in the nuclear industry. Companies like Vistra Corp. (VST) and Constellation Energy Corp. (CEG) have also made notable strides in this field. Vistra, for instance, has surged up 237% this year, making it the S&P 500’s best-performing stock of 2024.

Amazon’s agreement with Energy Northwest aims to support the construction of four advanced SMRs in Washington State. Moreover, the tech giant is investing in X-energy to incorporate its design expertise into the Energy Northwest reactors and is exploring a potential SMR project in Virginia in collaboration with Dominion Energy.

These maneuvers reflect a broader industry shift—tech companies are increasingly recognizing nuclear power as a viable solution to meet the high energy demands of AI data centers, which require significant and continuous energy supply. Compared to renewables like solar and wind, nuclear provides a more dependable energy source.

An Industry in Growth

The increasing acceptance of nuclear energy is not just limited to Amazon. Other tech giants, including Microsoft Corp. (MSFT), are also making significant commitments to nuclear power. Microsoft’s recent agreement with Constellation Energy to restart a Three Mile Island reactor further underscores this momentum in the sector.

The combined efforts from these major players in the tech industry indicate a renewed interest in advancing nuclear technology. As Google’s recent announcement highlighted, “The next generation of advanced nuclear reactors offers a new pathway to accelerate nuclear deployment thanks to their simplified design and robust, inherent safety.”

Potential Challenges in the Market

However, the trajectory may not be without hurdles. Following Google’s announcement, Jefferies analyst Julien Dumoulin-Smith cautioned that there could be complexities ahead for independent power producers (IPPs) focused on nuclear energy. He noted that the bullish outlook for nuclear stocks heavily relies on the ability to sell existing nuclear power at prices significantly above market levels.

While Amazon’s latest commitment appears to be a strong vote of confidence for the nuclear sector, it could potentially complicate the market landscape for existing nuclear producers. As a result, attention must be paid to how these announcements affect market sentiment and stock performance.

Stock Performance Highlights

On Wednesday morning, Vistra’s stock rose approximately 2%, while smaller players in the nuclear sector saw impressive gains. Notably, Nuscale Power Corp. (SMR), specializing in SMR technology, saw its shares rise by 28% in intraday trading, bringing its year-to-date gain to an extraordinary 447%. Oklo Inc. (OKLO) also experienced a spike, climbing by 27% on the same day, with its year-to-date increase now standing at 40% when accounting for Wednesday’s intraday performance.

The momentum created by Amazon and Google’s recent nuclear energy initiatives showcases the increasing relevance of nuclear power in the global energy transition. As more tech firms foray into this space, potential investors may consider closely monitoring nuclear stocks for further developments.

Conclusion

Amazon’s enhanced commitment to nuclear energy, alongside the moves by tech giants like Google and Microsoft, marks a significant turning point in how this industry is perceived and how it positions itself within the broader energy landscape. While challenges remain, the momentum in nuclear energy could spell good news for already thriving nuclear stocks in 2024 and beyond. As the sector evolves, stakeholders must remain vigilant in their evaluation of investment opportunities stemming from this nuclear renaissance.