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All we’ve been hearing for the past couple of years is how artificial intelligence (AI) is going to take over the world. Don’t get me wrong, semiconductor and tech stocks have done incredibly well. But with some saying they could be in a bubble, I’m starting to look and see what the next big stock market move from AI could be. Here’s one area that’s starting to heat up.
Going nuclear
I’m talking about nuclear energy. It could be the next big growth area as AI adoption progresses and investors look for the next batch of stocks that can benefit.
Training and running large AI models is hugely energy-intensive. I saw recently that data centres already consume almost 3% of global electricity, and that figure could double by 2030. Big tech firms are scrambling to secure clean energy to meet both sustainability goals and reliability needs. That’s where nuclear energy comes in.
Nuclear energy is carbon-free and highly reliable. This contrasts to solar or wind, which are intermittent. It’s true that in the past, people were more sceptical about nuclear with regard to being a clean-energy source. Yet here in the UK and in the US, governments are recommitting to extending plant lifetimes and investing in next-generation reactors.
When you put it all together, I think we could see a large push in the coming year and beyond for investment in nuclear power companies. This would likely come from both private firms seeking to power AI models and the public sector.
Zoning in
Believing in a theme’s one thing. The next stage is to go deeper and identify companies that could benefit. One example is NextEra Energy (NYSE:NEE). The US stock‘s up 8% over the past year.
It’s a leader in clean energy, with a large pipeline of renewables, storage and infrastructure projects. It’s in the news today (28 October) as it just entered a partnership with Alphabet regarding reviving an old nuclear plant in Iowa. I think this is just one sign of the direction that the company could be heading.
At the same time, this isn’t some kind of speculative energy operator. It has a solid balance sheet and steady cash flow from its regulated utility business, Florida Power & Light. It has a 2.63% dividend yield. Even though this might not be super attractive, banking income while waiting for a significant potential share price move is never a bad thing.
In terms of risks, new projects relating to nuclear are going to be very capital-intensive and expensive. If something goes wrong in this regard, it could spell serious financial trouble. There’s also a concern that I might be too early to buy a ticket for the nuclear train. NextEra might not rally for some time if investors believe there are bigger themes out there in the market.
Overall, I think nuclear’s going to be a big sector to watch for the coming year. I think NextEra’s one example of a stock that’s worth considering for investors.
