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The generative AI boom has made nuclear power a major new obsession for Big Tech. Some industry watchers aren't fully convinced that it should be — or that nuclear startups will be able to capitalize on the hype.
This year, companies at the forefront of AI development have been in a frenzy over nuclear power as they've searched for clean sources of electricity to run the energy-hungry data centers being built to serve their prized AI models.
Microsoft made a stunning move in September as it struck a 20-year power purchase agreement with Constellation Energy to awaken one of two dormant nuclear plants on Three Mile Island — the site of one of the most high-profile nuclear accidents in US history.
In October, Amazon took a stake in X-energy, a developer of small modular reactors (SMRs) that promise greater efficiency than large nuclear reactors. That same month, Google announced a clean energy agreement with Kairos Power, a company developing SMRs.
These deals have emerged at speed for a simple reason. An arms race in the tech sector between companies vying for control of the most powerful AI models is set to drive data center power demand through the roof, with Goldman Sachs estimating a 160% jump by 2030.
However, while Big Tech's ambitions to build the world's most potent AI models have invigorated their interest in nuclear power, investors, energy experts, and analysts are feeling split about whether it will help startups scale at pace and deliver fruitful returns.
One issue that skeptics point to is that nuclear reactors won't come online quickly enough or with the scale needed to meet the demands of energy-hungry data centers.
Jill McArdle, a campaigner at European nonprofit Beyond Fossil Fuels, told Business Insider that nuclear power is "completely off topic" as a current solution for powering data centers, particularly if tech companies are serious about the looming deadlines they've set to meet emissions targets.
Google aims to achieve net-zero emissions across all of its operations by 2030. Microsoft, meanwhile, has committed to being carbon-negative by 2030. "What we are talking about, especially now, is the next five years of how are we going to power this massive boom in data centers," McArdle said.
She added that more compact SMRs adopted by Big Tech also remain largely untested. Google's corporate agreement with Kairos Power, for instance, is expected to see the startup's first SMR come online by 2030, with others being added through to 2035.
One concern around large nuclear solutions is expense, with the likes of Microsoft's Three Mile Island deal unlikely to be replicated elsewhere. As McArdle put it: "Traditional nuclear just isn't going to be coming online at the scale and in the budget that we need to get it done."
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Venture capitalists have echoed this concern.
"The length of the investment is not compatible with private equity funds — maybe it's one for evergreen funds," said Guillaume Sarlat, partner at France-headquartered VC firm Axeleo Capital, which has deliberately excluded nuclear from its investment policy. "The other problem is, what are the economic conditions going to be when nuclear startups are ready to sell their product? What is going to be the cost of the electricity that they're going to produce in 20 years?"
He speculated that funds backing nuclear could aim for an internal rate of return of 15%, but the two main parameters that determine this would be productivity gains and the competitiveness of the nuclear solution. These factors could be affected by the price of gas and photovoltaic materials, making it a risky bet, he said.
On the technical side, nuclear startups will have to work hard to differentiate against existing fission technologies and "persuade investors that that marginal improvement is worth waiting another 10 years," said Matthew Blain, principal at climate tech fund Voyager Ventures.
While Blain noted an aligned "excitement" for nuclear fusion technology, he added that these startups would first need to demonstrate a believable pathway down the cost curve. "Your first dollars per megawatt of your first fusion plant will be astronomically expensive, and that will be competing on a 20 to 30-year timeframe with the cost of energy and battery storage," he told BI.
It's part of the reason investment in nuclear energy startups has fluctuated over the past five years. The industry had a banner year in 2021, with startups raking in $3.57 billion in VC funding, per PitchBook data. Figures subsequently dipped in 2022 and 2023, with VCs pouring $2.67 billion and $1.17 billion into startups, respectively.
"Nuclear energy requires a centralized infrastructure that is harder to scale incrementally," said Nicolas Heuzé, cofounder and CEO of osmotic energy startup Sweetch Energy. "And investors and governments often favor proven solutions, even though they are not perfect, over novel ones associated with emerging technology."
Despite the concerns, certain quarters of the tech sector remain convinced that nuclear is the way forward to support the AI data center boom.
A16z, the venture capital firm led by Marc Andreessen and Ben Horowitz, named "the resurgence of nuclear" as one of its big ideas for driving its "American dynamism" investment theme in 2025.
"A perfect storm of regulatory reform, public enthusiasm, capital infusions, and insatiable energy needs — particularly from AI data centers — will accelerate orders for new reactors for the first time in decades," is how David Ulevitch, a general partner at A16z, put it.
X Energy
A few things still need to be figured out. Blain notes that VCs will need to see if there is profit to be made on a technology that may offer "more of an infrastructure return" typically made through debt investments than the kind of outsized return a VC typically seeks from a bet on a software business. Nuclear startups may also opt to "take the trajectory of companies like SpaceX by staying private for a long period of time," he said.
That said, it's clear that money is flowing into the industry again, as VCs have deployed $2.62 billion into nuclear startups this year. Notable raises included X Energy's $500 million round and the $151 million raised by Paris-headquartered Newcleo, which is building SMRs using repurposed radioactive waste.
Newcleo's COO, Elisabeth Rizzotti, told BI that a Big Tech-fueled boom in demand for clean energy had made it an "attractive" option for investors. She added that the startup was potentially eyeing an IPO once it met two key milestones: building its first prototype in 2026 and getting pre-authorization to build its first reactor in France by early 2027.
Companies trying to sell the world on nuclear power will have to accept a hard reality, however: the clock's ticking on their opportunity to prove their solutions can meet the extraordinary energy demands of the AI industry. The data centers will keep on coming.
