Advanced nuclear's 'potential payoff' draws nearer, as data center needs mount

Interest in advanced nuclear developers in the US is accelerating as data center demand grows, but the nascent sector's next steps hinge on reactor technologies, hyperscaler capital plans and policy support.

"Accelerating US power demand has helped start greasing the wheels of the advanced reactor renaissance," said Gregory Lewis, an analyst at global financial services firm BTIG. "We do not expect a winner-take-all solution, but instead we see paths forward for several reactor designs as they look to secure their first commercial orders."

More than 100 advanced reactor designs are competing in various stages of development, according to S&P Global Commodity Insights data, and many are categorized collectively as small modular nuclear reactors (SMRs) with a capacity of 300 MW or less. The global SMR pipeline has expanded to about 22 GW, with about 7 GW in advanced stages of development.

None of those companies have commercialized designs in the US. Without significant acceleration in permitting or construction, many development timelines remain ambitious, S&P Global Commodity Insights analysts said.

The Tennessee Valley Authority announced an agreement Sept. 2 for ENTRA1 Energy LLC to provide the federal power authority with up to 6 GW of new nuclear power using NuScale Power Corp.'s VOYGR 77-MW SMR design.

The US Nuclear Regulatory Commission (NRC) in July accepted the TVA's application to build what could be the first utility-scale SMR in the country, using a different reactor design, GE-Hitachi Nuclear Energy Inc.'s BWRX-300 SMR. The NRC set a 17-month review schedule.

Prospective market

Bank of America analysts have estimated SMRs could be a $1 trillion market totaling 343 GW by 2050, driven by data center demand.

Morgan Stanley in August raised its long-term investment forecast for the larger nuclear energy industry through 2050 to $2.2 trillion, up from $1.5 trillion.

The World Bank recently lifted its ban on financing nuclear power projects, which could set the stage for other international lenders.

Deals between tech companies and nuclear developers have been a major capital driver. But near-term equity moves will hinge on hyperscaler capex momentum, as well as the nuclear industry's ability to manage costs and timelines after a history of budget and schedule overruns, and at least one advanced reactor project failure, analysts said.

SMR stocks will trade on near-term catalysts, analysts said, with hyperscaler capex expectations doubling over the last 18 months to $385 billion for 2025–2028 and US data center construction spending continuing to grow.

First-of-a-kind costs for reactor technologies may be high compared to spot gas, analysts said, but they could be competitive with combined-cycle gas and renewables-plus-storage when firm capacity is required.

Advanced reactor developers, including X-energy LLC and Kairos Power LLC, previously announced partnerships and early commercial agreements with major tech companies including Google and Amazon.

"We see SMRs as tethered to the data center/AI build-out in the near term," Bank of America analysts said. "If AI capex slows, so will SMR momentum."

Chris Levesque, CEO of TerraPower LLC, said the biggest hurdle is companies showing they can deliver, according to a September Barclays analyst report.

"The reality check will come when the first company gets their third or fourth [reactor] fully financed and demonstrates they can deliver on cost reductions," said Francesco d'Avack, associate director of energy transition investments for S&P Global Commodity Insights. "If that does not happen by the early 2030s, I think interest will fizzle."

BTIG's Lewis told Platts that SMRs "have their foot in the door with customers putting up capital to help drive the commercialization."

Fundraising

TerraPower and Oklo Inc. marked significant funding milestones so far in 2025, raising more than $1 billion combined in June alone.

"On the venture capital/private equity side, [there is] definitely more curiosity, maybe also fear of missing out, given the hype," d'Avack said.

Some companies are exploring public offerings through traditional IPOs or special purpose acquisition company mergers.

"Almost all the capital that went into the sector for now is for designs — paper reactors. A whole different scale of capital is needed to start scaling up and go from first-of-a-kind to many-of-a-kind needed to bring down costs. And here, the investment case is much less clear," d'Avack said.

Bill Gates-backed TerraPower announced a $650 million investment in partnership with NVentures LLC, venture capital arm of NVIDIA Corp.

During Oklo's second-quarter earnings call, Chairman and CEO Jacob DeWitte announced the company had raised $460 million in capital. Oklo has one of the largest publicly disclosed customer pipelines, totaling about 14 GW, including an agreement with data center developer Switch for about 12 GW.

Oklo, NuScale and NANO Nuclear Energy Inc.'s share prices have all more than tripled since their stock debuts.

"The conversation around SMRs has quickly progressed from science experiment to green power solution ... and valuations appear to reflect the hype," Lewis said. "There's been a generational change in how [some] are viewing nuclear, and technology has gotten better."

NuScale, with its pressurized water-cooled reactor, likely has a path of least resistance to commercialization, Lewis said. The company's design is a light-water reactor similar to larger pressurized water reactors, which supply about 70% of the world's nuclear capacity. NuScale aims to bring its first SMRs online by 2030.

"Disrupting the global nuclear power market will take time," Lewis said. "I don't think we're in a position to know who the winners are going to be, we just think there will be some."

Analysts cautioned that advanced nuclear's ties to tech companies come with risk, and some critics believe the connection could spell trouble.

"With the bursting of the AI bubble, no doubt the bursting of the nuclear power bubble will follow," Edwin Lyman, director of nuclear power safety at the Union of Concerned Scientists and longtime nuclear watchdog, said in an Aug. 21 social media post, referring to recent news reports that some major tech companies were spending less on hiring AI talent.

Policy support

Federal and state policies have created tailwinds that may boost momentum for new nuclear technologies, but they also depend on NRC licensing timelines, fuel availability and supply chain.

President Donald Trump's executive orders include a goal of quadrupling US nuclear capacity by 2050 to 400 GW, along with directives to facilitate construction, develop technologies, cut restrictive regulations and overhaul the NRC to produce a "nuclear energy renaissance."

The US Energy Department will have at least three SMRs up and running by July 2026, Secretary Chris Wright promised senators June 18.

"Let's get them on the ground," Wright said. "These are reactors that have been talked about for 15 years."

The DOE has been a significant backer of nuclear power, providing grants and loans for early-stage commercialization, including NuScale's now-canceled project, TerraPower's Wyoming project and X-energy's Washington project — investments totaling $4.6 billion.

"Given the risk and uncertainty over timelines, I think it will be difficult to mobilize private capital without significant backing from public money," d'Avack said.

While the 2025 federal budget bill accelerated the phase-out of tax incentives for wind and solar, nuclear retained its benefits.

The 2024 Advance Act directs the NRC to cut licensing reviews from more than three years to 18 months.

"Policy support means SMRs are relevant today, even if capacity additions come later," Bank of America analysts said.

The TVA led an application earlier this year for $900 million in federal grant funds to help pay for the BWRX-300 project at Clinch River, alongside Duke Energy Corp., American Electric Power Co. Inc. and others, which could accelerate construction by two years, with commercial operation planned in 2033.

Commercial deployment

Several US utilities include advanced nuclear in their resource planning, though few are likely to be first movers, executives said.

Duke's long-term resource plans in the Carolinas include a target of 300 MW of new, advanced nuclear by 2034 and a total of 600 MW by 2035. The utility has also told Florida regulators it is exploring advanced nuclear at the site of a previously abandoned nuclear project in the state.

Dominion Energy Inc. has signed an agreement with Amazon to explore SMRs in the state to meet expected data center demand.

Entergy Corp. has an agreement with Holtec International Inc. to consider its reactor design and is also evaluating the BWRX-300, Chairman and CEO Andrew Marsh said earlier this year.

Whether advanced nuclear will have sufficient scale to affect the energy landscape in the US and beyond, and whether it will sustain a large capital deployment, remains to be seen, d'Avack said.

"There is a big misalignment of timelines," d'Avack said. "Data centers need power now," and even if an SMR company connects its first unit to the grid by the early 2030s, by the time permitting, supply chain and labor force have scaled enough to deliver the gigawatts needed, "the race might already be over."

But that does not mean investors aren't hopeful.

"The potential payoff is sufficiently close and at the same time sufficiently far off to allow people to dream on for a while," d'Avack said.