Oklo (OKLO) — the nuclear power startup backed by OpenAI head Sam Altman — has surged more than 100% in October as major hyperscalers have decided to double down on the nuclear renaissance to fuel data centers and artificial intelligence.
Nuclear energy-related plays, including Oklo, have been on a tear since late September when Microsoft (MSFT) announced a two-decade contract with S&P 500 component Constellation Energy (CEG) to provide nuclear power for the tech giant’s data centers.
Now, Amazon.com (AMZN) and Alphabet (GOOGL) have also inked nuclear deals, sending nuclear-related stocks higher. However, many of the stocks are extended.
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Both Amazon and Google announced in recent days decisions to invest in developing the emerging small modular reactors, or SMRs, technology. SMRs do not currently exist but there are a number of companies working to develop the technology. In March, Amazon made an early move toward nuclear, paying $650 million for a Talen Energy (TLNE) nuclear-powered data center campus in Pennsylvania.
Top hyperscalers — the largest cloud, data center and AI operators — include Amazon, Microsoft, Alphabet and Meta (META) — are increasingly looking to nuclear power as a solution to vaulting energy consumption from data centers.
AI And Nuclear Energy
So far in 2024, nuclear power and utility stocks have been riding the artificial intelligence energy wave.
Artificial intelligence — and the data centers needed to train the systems — are expected to boost energy demand throughout this decade. In the U.S., McKinsey & Co. projects that data center energy demand will grow from around 4% currently to 11%-12% by 2030.
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Many technology companies are investing in or partnering with nuclear power providers to ensure energy supplies for their data centers.
Morgan Stanley analysts have proclaimed in recent months that a “nuclear renaissance” is underway.
They wrote that nuclear power, while still a divisive issue, is making a comeback. The firm sees $1.5 trillion in investment in new capacity through 2050.
Meanwhile, Morgan Stanley analyst David Arcaro wrote that the Constellation-Microsoft deal “proves out the value of nuclear power for hyperscalers, with higher prices for future deals.”
Stocks Rally
S&P 500 leader Vistra (VST), a nuclear power utilities play, edged down 0.2% Thursday during market trade after jumping 5.7% on Wednesday. Fellow S&P 500 component Constellation Energy fell 1% Thursday. On Wednesday, CEG gained more than 5%.
Vistra and Constellation Energy have surged 46% and 34%, respectively, since The Microsoft-Constellation Energy deal on Sept. 20.
JPMorgan on Thursday initiated coverage of S&P 500 components Constellation Energy and Vistra Energy. The firm handed both VST and CEG an overweight rating.
JPMorgan has a 342 price target on Constellation Energy and a 178 price target on Vistra. This represents further 22% upside to CEG and 31% upside for VST compared to current trading levels.
Meanwhile, Oklo sank 11% Thursday after surging 40.5% on Wednesday and clearing an early entry Tuesday. The Altman-backed SMR developer, has soared 104% in October and 150% since the Microsoft-Constellation Energy deal.
ARK Invest’s Cathie Wood has been building a position in Oklo worth more than $2 million since mid-July. Peter Thiel is also a major investor in Oklo.
Fellow SMR-focused company Nano Nuclear Energy (NNE) also declined around 17% Thursday after leaping 37.8% on Wednesday. NuScale Power (SMR) fell about 2% Thursday. SMR shares soared. 40% on Wednesday.
Uranium refiner Cameco (CCJ) edged up 1.5% in early market action Thursday. The stock jumped 7.8% to 55.77 during market trade on Wednesday, gapping above a 52.32 buy point. CCJ was Wednesday’s IBD Stock Of The Day.
Canada-based Cameco is one of the world’s largest providers of uranium with utilities around the globe relying on the company to provide nuclear fuel solutions.
Meanwhile, Uranium Energy (UEC), which engages in uranium exploration and development in the U.S. Southwest and Paraguay, advanced 4.4% Thursday. The company said Thursday it received approval from the Wyoming Department of Environmental Quality to increase uranium production capacity at a major processing plant.
UEC gained 8.5% on Wednesday.
Please follow Kit Norton on X @KitNorton for more coverage.
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