2 Nuclear Stocks Chasing a $7 Trillion Opportunity

According to a new report published by global consultancy McKinsey & Co., there's a new $7 trillion opportunity that every investor should be aware of now. "The race to scale AI [artificial intelligence] has triggered one of the largest infrastructure build-outs in modern history," the report begins. "By our estimates, global spending on data centers could reach $7 trillion by 2030."

Most investors looking to ride the AI trend have gone after AI stocks. Others have looked to buying data center REITs in order to cash in on the AI industry's rapidly rising appetite for new compute power.

But there's one other category AI investors should be closely monitoring: nuclear energy. That's because it has the potential to deliver huge amounts of clean, reliable power to both the AI and the data center industries. When it comes to high-upside nuclear energy stocks, two clearly top the list.

Image source: Getty Images.

1. Oklo is a perfect fit for AI investors

The most obvious nuclear energy stock that AI investors should consider is Oklo (NYSE: OKLO). Its business model is tailored to meet the AI industry's insatiable need for new energy sources. Indeed, Sam Altman, the CEO of OpenAI, was an early investor in Oklo, acting as chairman for many years before stepping down to avoid conflicts of interest.

"My whole view of the world is the future can be radically better and the two things that we really need for that are to lower the cost of energy and lower the cost of intelligence. And if we get those, we'll be quite surprised about how different and how much better the future is," Altman told reporters in 2023.

The reason he is so adamant about lowering the cost of energy is that doing so would directly lower the "cost of intelligence," as he puts it. That's because AI applications are energy-intensive. In Altman's view, a lack of new energy generation supply is limiting the AI industry's potential.

Oklo's business model is technologically complex, but narratively simple. Data centers to support AI are being built at a rapid pace globally. There isn't currently enough energy supply to meet the needs of this new infrastructure. However, Oklo's small modular reactor (SMR) designs can deliver reliable baseload electricity power directly to data centers, even in remote regions. One day, they could even be put into space.

Oklo stock is up roughly 200% in value over the past year. But year to date, shares have pulled back by roughly 7%. Just remember: As with the stock we'll discuss next, these investments are likely best for those looking for maximum upside potential, with an ability to wait out long stretches of heavy volatility.

2. NuScale Power could be a dirt cheap SMR stock

Oklo currently has a market capitalization of nearly $13 billion. NuScale Power (NYSE: SMR), on the other hand, is currently valued at just $4.3 billion.

NuScale's business model is very similar to Oklo's. The company designs and manufactures small modular reactors, or SMRs. But instead of marketing its plants directly to data center and AI companies, NuScale is looking to deploy grid-scale systems. For example, it has a deal with the Tennessee Valley Authority to build a 6-gigawatt SMR system. Most of Oklo's customer pipeline, meanwhile, is filled with systems of a much smaller size.

It's difficult to know yet which company's strategy will work best. When it comes to SMR deployments, there's heavy competition. For its utility scale systems, NuScale faces competitive pressure not only from other pure play SMR companies -- both public and private -- but also from diversified industrial conglomerates with much bigger budgets. Oklo may be targeting a less crowded niche by going directly to large data center operators, but these deals are often smaller and more bespoke.

If you're looking to ride the $7 trillion data center boom, buying shares of both companies would give you to ways to profit without needing to predict the exact winner.

Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.