Cameco's CEO Says AI Isn't the Reason to Own Nuclear. Here's What He Says It Is.

The logic makes enough sense superficially. If artificial intelligence (AI) data centers need more power than utility companies can provide, and if nuclear power is proven to be cost-effective and safe, than nuclear power is an investment-worthy solution.

The actual bullish argument isn't quite so simple, however. That's the word anyway from Tim Gitzel, the CEO of uranium miner and enricher Cameco (NYSE: CCJ). During last month's third-quarter earnings conference call, he pointed out something that could concern as well as comfort investors connecting these dots.

What he said (and why)

Here's the deal: The connection isn't an unreasonable one to make. When the utility Constellation Energy announced in 2024 it would be restarting one of the mothballed nuclear reactors at its Three Mile Island power facility, it explicitly named Microsoft as the reason. Since then, other data center operators and utilities have forged similar partnerships.

And for good reason. Goldman Sachs believes data centers' demand for power will grow 170% worldwide between 2025 and 2030.

For perspective on the matter, Gitzel said during the third-quarter earnings call that "artificial intelligence and data centers can provide meaningful upside, but they are not the foundation of the nuclear investment thesis, nor are they a load-bearing assumption in our strategy."

He said that the crux of Cameco's long-term opportunity "remains grounded in the reactors, contracts, and fuel requirements that exist today, underpinned by those life extensions, restarts, and uprates, along with electrification, onshoring of manufacturing, and decarbonization," adding "new reactors already under construction add requirements on top of that established demand base."

And he's right. As much as AI-driven demand for power is apt to grow from here, the International Energy Agency estimates that even by 2030, data centers will only be consuming a little less than 3% of the planet's total electricity production. Manufacturing will still account for the biggest use of this power, followed closely by transportation, and then residential usage. AI data centers will only collectively require about as much electricity as electric vehicles will by that point in time.

Image source: Getty Images.

Along these lines, GE Vernova has also been identified as a beneficiary of AI's explosion because its natural gas turbines are a quick solution to the power-shortage problem. But its CEO, Scott Strazik, said during the company's recent third-quarter earnings call that only about 20% of his business customers were data center owners. The rest were more conventional buyers, like utilities.

Nothing to do, but certainly something to know

This fresh insight doesn't necessarily require investors to take immediate action. It is something to keep in mind, though. Plenty of nuclear power stocks like Cameco have been pushed and pulled along with more-straightforward AI stocks' ebb and flow when perhaps they shouldn't have been. Far more pertinent is the fact the World Nuclear Association believes worldwide nuclear power production will roughly triple between now and 2050, with or without the continued proliferation of AI data centers.

Just make sure you have a good grip on what's really driving things here. The market has somewhat lost sight of that lately.

James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cameco, Constellation Energy, GE Vernova, Goldman Sachs Group, and Microsoft. The Motley Fool has a disclosure policy.