Should You Ignore the Nuclear Hype and Buy This Instead?

Over the past few years, Wall Street has fallen back in love with nuclear power. And it's easy to see why.

AI is driving a surge in electricity demand, prompting governments to extend the lives of existing reactors and encouraging big tech to secure nuclear power for data centers. As a result, we've seen a run-up on uranium miners, reactor developers, and nuclear fuel companies.

That said, you don't have to pile into the same nuclear stocks as everyone else to benefit from this trend. In fact, I would even argue there's a much easier, safer way to profit from the continued rise in electricity demand while still getting exposure to the nuclear energy renaissance.

NextEra Energy is the play

Hyperscale data centers can require hundreds of megawatts of electricity, with some campuses eventually consuming more than 1 gigawatt on their own. To put that in perspective, that's enough to power roughly 750,000 U.S. homes, or every single home in the state of Maine.

Image source: Getty Images.

One typical nuclear reactor can generate about 1 gigawatt of electricity. So it makes sense that there's been a resurgence of interest in nuclear power. But this isn't just about nuclear. It's about electricity in general, regardless of where it comes from. And certainly, NextEra Energy (NYSE: NEE) is capitalizing on this trend.

Earlier this year, Florida Power & Light (FPL), NextEra's regulated utility, increased its forecast for large-load demand from 6 gigawatts to 8 gigawatts by 2032. Management also disclosed roughly 21 gigawatts of large-load interest, including 12 gigawatts already in advanced discussions. Some of those customers could begin taking service as early as 2028.

Nuclear still matters

When electricity demand rises, utilities sell more power and build more infrastructure. And that infrastructure becomes part of the utility's regulated asset base, so it can generate returns for decades. That's exactly what's happening at FPL.

Management estimates that every additional gigawatt of large-load demand requires roughly $2 billion of investment in transmission lines, substations, and other grid infrastructure. If FPL ultimately reaches its forecast of 8 gigawatts, that's about $16 billion in new investment.

Under Florida's regulatory framework, those assets are eligible to earn FPL's authorized return on equity. Put it all together, and that level of investment could eventually support more than $1 billion in annual pretax earnings once the projects are fully built and serving customers.

This doesn't mean nuclear is irrelevant. In fact, NextEra already operates one of the nation's largest nuclear fleets, alongside the world's largest portfolios of wind, solar, and battery storage assets. As electricity demand grows, the company stands to benefit regardless of whether new supply comes from nuclear, natural gas, renewables, or some combination of all three.

Indeed, nuclear power is experiencing a level of interest and growth we haven't seen in decades. But no matter how you slice it, that interest and growth only exist because of the rapid rise in electricity demand.

And the best way to profit from that trend is not by putting all your eggs in the nuclear power basket. It's about getting exposure to all of it: nuclear, renewables, storage, natural gas, and the infrastructure that makes it possible to power today's global energy economy. NextEra allows you to do just that.

Jeff Siegel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends NextEra Energy. The Motley Fool has a disclosure policy.