Thematic Spotlight: Uranium Fuels the AI Revolution
Big tech is going big on nuclear. Last week, tech giant Microsoft Co. signed a 20-year power purchase agreement to with Constellation Energy, a clean energy provider, to power its datacentres.1 The deal involved restarting the Three Mile Island Unit 1 (TMI 1) nuclear reactor in Pennsylvania, marking a significant turning point for an area which has plenty of history with nuclear power gone wrong.2 Next door, also in Pennsylvania, Amazon has started hiring nuclear engineers after purchasing a US$650 million datacentre powered by the Susquehanna nuclear station.3 Clearly, there’s a growing connection between big tech and nuclear power – but why?
The answer is artificial intelligence. AI as it now operates, consumes immense amounts of power, and with large language models (currently our most advanced form of AI) increasing in complexity day by day, the outlook for power demand looks intense to say the least. Projections from the International Energy Agency suggest that combined electricity demand from datacentres, AI, and crypto miners could combine to more than 1,000 TWh by 2026 – for reference, that’s roughly equivalent to the entire electricity usage of Japan.4
For big tech firms, winning the race to AI is of critical importance, but balancing that need with ‘not destroying the environment’ has been difficult. Nuclear energy offers an energy dense and low-carbon gateway for tech titans to power their AI ventures. Microsoft’s newly contracted TMI 1 reactor, for example, could power more than 800,000 households at full capacity.5 Similarly, Amazon’s new Susquehanna nuclear plant produces 2500 MW of carbon-free power and is capable of serving an even more impressive two million homes – all without emitting a single drop of carbon.6
As the world’s energy demands increase and decarbonisation continues to grow in importance, there exists a clear case for nuclear as a major part of the energy transition. Big tech firms are not the only entities privy to this potential megatrend. The shift in sentiment towards nuclear energy is global, and government initiatives supporting the trend are evidence of its importance. For investors, there appears to be a strong bull case for the proliferation of nuclear power looking forward.
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Forecasts are not guaranteed and undue reliance should not be placed on them. This information is based on views held by Global X as at 24/09/2024. Investing involves risk, including the possible loss of principal. Diversification does not ensure a profit nor guarantee against a loss.
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This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information is not intended to be individual or personalised investment or tax advice and should not be used for trading purposes. Please consult a financial advisor or tax professional for more information regarding your investment and/or tax situation.