Big Tech puts financial heft behind next-gen nuclear power as AI demand surges

April 9 (Reuters) – Big Tech is reshaping the funding landscape for new nuclear technologies as it seeks to bolster electricity supply for power-hungry AI data centers, inking deals that offer nuclear companies both funding and a clearer path to making money.

Several U.S. ‌firms are developing new modular reactors that are smaller, more advanced and scalable than conventional nuclear plants. But none have begun commercial electricity production yet as projects face challenges such as financing constraints and first-of-its-kind risks.

However, the race to secure adequate energy to power data centers amid the burgeoning demand from AI is giving a fresh boost to the sector.

In January, Meta (META.O), opens new tab agreed to help fund the development of two Terrapower units capable of providing as much as 690 MW of power. It has also signed a deal with Oklo (OKLO.N), opens new tab to develop a 1.2 GW nuclear technology campus ⁠in Ohio.

Amazon (AMZN.O), opens new tab, meanwhile, is working with X-energy to bring online more than 5 GW of small modular reactors in the U.S. by 2039, while Alphabet’s Google (GOOGL.O), opens new tab has signed an agreement with Kairos Power, aiming to bring online its first small modular reactor by 2030.

With these deals, tech giants introduce their top-rated corporate balance sheets into a sector historically reliant on the very regulated utility rate bases, said Shioly Dong, senior analyst at BMI, a unit of Fitch Solutions.

“They create the revenue certainty that commercial banks will require for the construction debt,” she said.

INVESTORS INTERESTED, BUT CAUTIOUS

U.S. electricity use is poised to increase by 1% this year and 3% next year, according to the Energy Information Administration, driven largely by data center demand.

Against this backdrop, small modular reactors are emerging as more financeable nuclear alternatives because their modular scale and shorter construction timelines reduce upfront capital exposure, said Tim Winter, portfolio manager of the Gabelli Utilities Fund (GABUX) at ‌Gabelli Funds, ⁠adding that he is closely monitoring companies like NuScale and Oklo.

“The industry needs “someone” to take on the risks of cost overruns and delays. The degree the hyperscalers are willing to do that will determine just how much of a boost (these agreements give the sector),” he added.

AI demand is prompting customers to enter into long-term agreements that can support project development, said Oklo spokesperson Bonita Chester. The company’s agreement with Meta, for instance, includes funding ​to help secure nuclear fuel and ​advance the first phase of its ⁠Ohio project.

The prospect of long-term power buyers is also drawing the interest of some institutional investors to the sector, which has historically depended on government support and venture capital funding.

“We have started to hear that banks ​are getting excited and interested in deal-making in the space, which would be a big development – we haven’t ​seen that yet,” ⁠said Tess Carter, associate director of the energy and climate practice at Rhodium Group.