The next generation of nuclear technology could be moving closer to becoming a reality, driven by the tech sector's growing demand for electricity to power artificial intelligence. Small modular reactors , or SMRs, promise to reduce capital costs and accelerate construction timelines that typically plague nuclear plants, but the technology has struggled to reach the commercial stage. The difference now is the appetite of tech companies for fossil-free fuel. Amazon and Google, a unit of Alphabet , made back-to-back announcements this month putting real money behind these reactors. "In the absence of these tech companies, no one was going to build an SMR in the public utility world," Paul Zimbardo, managing director at Jefferies, told CNBC. Demonstrating its faith in the technology, Google agreed to buy power from Kairos, a private developer of small modular reactors. Financial terms weren't disclosed. Amazon is investing more than $500 million in the development of advanced reactors across several projects. As a result, the outlook for SMRs is improving and the potential market is far larger than appreciated, Morgan Stanley analyst Andrew Percoco wrote in a research report to clients Wednesday. The market for SMRs could grow by two gigawatts to five gigawatts by 2035 assuming big tech companies make up a majority of the demand, Percoco said. That would represent between 6 and 17 reactors if each SMR averages 300 megawatts. Tech as a catalyst Utilities themselves have been reluctant to invest in SMRs due to the high costs associated with building a first-of-a-kind project, Zimbardo said. They have a responsibility to shareholders to make prudent decisions at the lowest cost, he added. The tech companies, meanwhile, need reliable, carbon-free electricity to power AI data centers and are increasingly willing to pay a premium for nuclear-fueled power as a consequence. Microsoft , for example, agreed to pay $130 per megawatt hour for electricity from the mothballed Three Mile Island nuclear plant in Pennsylvania that Constellation Energy is restarting, according to Percoco. "The cost of an SMR is highly uncertain but could potentially be feasible [at that] price level," the Morgan Stanley analyst said. Investor options limited Investors who want exposure to SMRs have limited options right now. "There are not really large, liquid companies involved in SMRs," Zimbardo told CNBC. The small, pure-play advanced reactor companies NuScale and Oklo are options, but their stocks are volatile and the business outlook is uncertain. NuScale, with a market value of $4.7 billion, is up 54% in the past month, while Oklo, worth about $2.5 billion, has more than doubled. Neither are involved in the Google and Amazon power deals. NuScale tried to deploy SMRs at a site in Idaho but the project was canceled last year as the price tag ballooned due to inflation and high interest rates. Oklo is promising to build microreactors that range in size between 15 megawatts and 100 megawatts. The startup, backed by OpenAI CEO Sam Altman, hopes to have its first reactor up and running, also in Idaho, in 2027. GE Vernova offers some exposure to SMRs, albeit inside a sprawling business mostly focused on gas- and wind-powered turbines. The company is slated to start construction on its BWRX-300 small modular reactor in Ontario next year, with the plant scheduled to come online in 2029. But GE Vernova doesn't expect SMRs to become "a meaningful part of our income statement with revenue and growth until early into the next decade," Chief Financial Officer Kenneth Parks told investors during the company's third-quarter earnings call on Wednesday. SMR OKLO 1M mountain NuScale Power has climbed 54% and Oklo by 117% in the past month.
