Amazon Nuclear Bet Looks Like a ‘Game-Changer’
Updated Oct 16, 2024 12:20 pm EDT / Original Oct 16, 2024 9:07 am EDT
Amazon is going all-in on nuclear power.
The tech behemoth will make a down payment on a set of new nuclear reactors in Washington state that can power its data centers and other homes and businesses in the area, the company announced Wednesday. Amazon.com
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also will make an equity investment in an upstart nuclear company and study whether to fund a separate nuclear plant in Virginia.“We’re very bullish about the technology,” said Amazon Web Services CEO Matt Garman in an interview with Barron’s. “We think that it’s one of the key parts of our portfolio going forward as we move towards completely clean energy.”
Shares of Amazon were falling about 1% in early trading, but nuclear investors were clearly feeling bullish. The stocks of developers of small modular nuclear reactors were soaring on the news. Oklo, a small nuclear reactor developer backed by OpenAI CEO Sam Altman, rose 28% on Wednesday. Nuscale, another publicly traded developer, was up 35%. Uranium producer Cameco was up 7%.
Amazon’s announcement is the latest sign that big tech companies are turning to nuclear to solve a growing industry problem—squaring their enormous electricity needs with their climate commitments. Alphabet’s
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Google and Microsoft MSFT
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also have announced plans to pay for new nuclear power, and Amazon made a previous deal with Talen Energy to buy power directly from a Pennsylvania nuclear plant.Tech giants are looking for ways to secure power for their data centers, which are consuming much more electricity as they develop artificial-intelligence applications. The companies have said they want to reduce their carbon footprints to slow global warming, and executives think nuclear fits the bill. Nuclear plants don’t emit carbon and operate continuously, unlike intermittent solar and wind resources.
The biggest obstacles for nuclear adoption are that reactors take a long time to build—none of the Amazon–funded reactors will be complete before 2030—and can be very expensive. A big one with 1,000 megawatts of capacity is likely to cost more than $10 billion, and the last set of reactors went an estimated $20 billion over budget. Utilities have so far balked at building new nuclear reactors because of those factors. Only three have been constructed since 2000.
Amazon’s electricity needs are rising fast today as it invests heavily in deploying AI. Garman says that the nuclear reactors may not solve those short-term needs, but Amazon is “investing both in the short and long term.”
“I would take them today if the technology existed, but it doesn’t,” he said.
“I think if you look over the next 20 to 30 years, the electricity needs of our country and the world are only going to keep increasing,” he added. “We’re taking the long term view of that bet that nuclear is one of those important building blocks.”
In Washington state, Amazon is partnering with a consortium of public utilities, known as Energy Northwest, to help fund the development, licensing, and construction of four small nuclear reactors with a total of 320 megawatts of capacity or enough to power around 200,000 homes. They’ll be placed in the area of the Columbia Generating Station nuclear energy facility in Richland, Washington, which already has a traditional reactor. Amazon will have the right to buy the power from the new reactors, but they’ll be owned and operated by Energy Northwest. The deal may lead to eight more small reactors on the site, for a total of 960 megawatts, or enough for 700,000 or so homes.
The reactors will be built by X-energy, a privately held Maryland company that is working on advanced reactors, meant to be cheaper and more efficient than current models. It’s one of several companies looking to build small modular reactors. X-energy hasn’t yet won approval for its design from the Nuclear Regulatory Commission, but has secured federal funding and other commercial deals, including with chemical company Dow. No small modular reactors exist yet in the U.S. but several companies are working on them.
The financial terms of the Amazon agreement weren’t released. But the fact that Amazon is investing money for the reactors upfront, instead of simply committing to buy the power, is a very big deal, said X-energy CEO J. Clay Sell in an interview.
“To have a company the size of Amazon’s step up and say they’re prepared to put hundreds of millions of dollars into the construction of new nuclear is a complete game-changer,” Sell said. “I think it really puts us on course for commercializing the technology.”
Amazon will lead a $500 million equity investment round in X-energy, which also includes investors like Citadel CEO Ken Griffin, affiliates of Ares Management Corp., and the University of Michigan’s endowment.
The company is exploring a separate nuclear investment in Virginia too. Dominion Energy
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, a Virginia-based utility, is considering adding more nuclear power at an existing plant along the North Anna river in Louisa County, Virginia. Dominion said it expects power demand to double in Virginia, the home of more data centers than anywhere else in the world, in the next 13 years. Amazon and Dominion will explore the idea of building small modular reactors there.X-energy isn’t public yet, though Sell said that the company plans to join the public markets eventually. There are a few other ways to play the growth of small modular reactors, including by investing in developers Oklo and Nuscale or in other nuclear tech companies like BWX Technologies, GE Vernova
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and Centrus Energy. Barron’s explored the trend.The fact that nuclear stocks were all moving higher on Wednesday shows that the Amazon deal is an “important inflection point for the nuclear industry,” according to Paul Dotson, a managing director of equity trading at TD Cowen. “The nuclear cohort which is made up of different types of companies (utilities, uranium, reactors, SMRs) usually don’t trade in unison (different shareholder bases, factor considerations). This is now starting to change as more deals are announced with global thought leaders.”
Write to Avi Salzman at avi.salzman@barrons.com