AI's Power Thirst Ignites Nuclear Revival, Boosting Utility Stocks
Google's deal with NextEra Energy to restart a nuclear plant for its data centers highlights a growing trend among tech giants to secure carbon-free power.
The technology industry’s voracious appetite for artificial intelligence is creating an unprecedented power crunch, forcing tech giants to make massive investments in the once-sidelined nuclear energy sector and igniting a rally in utility stocks.
In a landmark move, Alphabet's Google is partnering with NextEra Energy to restart the Duane Arnold nuclear power plant in Iowa, which was decommissioned five years ago. The deal, announced Tuesday, is designed to provide constant, carbon-free electricity to power Google's energy-intensive data centers. The market reaction was immediate, with shares of NextEra Energy (NYSE: NEE), one of America's largest clean energy providers, climbing nearly 4% in pre-market trading to approach their 52-week high.
This partnership underscores a critical challenge facing the AI revolution: its enormous and rapidly growing energy consumption. U.S. data centers are projected to increase their electricity use by 133% to 426 terawatt-hours by 2030, with AI-related operations potentially accounting for over 5% of the nation's total electricity generation within the decade, according to recent analysis.
This demand surge is straining the nation's grid and pushing tech companies to seek out reliable, 24/7 power sources. While renewable sources like solar and wind are part of the solution, their intermittent nature makes them insufficient for data centers that cannot afford downtime. Nuclear power, with its ability to provide constant baseload electricity without carbon emissions, is emerging as a preferred solution.
"We need clean, firm energy to reach our 24/7 carbon-free energy goals, and NextEra Energy shares that vision," Google stated in the announcement. The Duane Arnold plant is expected to be brought back online by early 2029 under a 25-year agreement.
NextEra Energy, with a market capitalization of over $173 billion, is well-positioned to capitalize on this trend. The company operates a significant portfolio of wind, solar, and nuclear assets, making it a key partner for corporations pursuing ambitious clean energy goals.
Google is not alone in its pursuit of nuclear power. Microsoft has a 20-year power purchase agreement for the Three Mile Island nuclear plant, while Meta has secured the entire energy output of an Illinois nuclear facility for two decades. These deals signal a broader strategic shift within Big Tech, transforming them into some of the largest buyers of clean power and key drivers of new energy infrastructure development.
The trend has also caught the attention of federal regulators. Recognizing the urgency, the U.S. Department of Energy recently directed the Federal Energy Regulatory Commission (FERC) to accelerate the grid interconnection process for large energy consumers like data centers, aiming to streamline approvals.
As the AI arms race continues, the symbiotic relationship between technology and energy providers is set to deepen. For utility companies with clean, reliable generation assets, particularly nuclear, the immense power demands of the digital age represent a generational growth opportunity, promising to reshape both the tech and energy landscapes for years to come.