Better Energy Stock: Plug Power vs. Oklo Inc.

The world is hungry for more energy. In the U.S. alone, electricity usage is expected to grow by 4% annually through 2030. Most of this growth, however, will be fueled by the artificial intelligence (AI) industry, which is expected to triple its energy needs from 2024 through 2030.

The management teams of two companies -- Plug Power (NASDAQ: PLUG) and Oklo Inc. (NYSE: OKLO) -- are telling investors that their technology holds the key for meeting the AI industry's rapidly growing energy needs. Plug Power is focused on hydrogen fuel cells, while Oklo is helping pioneer a new approach to nuclear energy using small modular reactors.

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If successful, both stocks hold tremendous growth opportunity. But from an investing standpoint, only one of these companies should be trusted with your money.

Oklo Inc. stock is better than Plug Power for one obvious reason

The needs of the AI industry are very specific. The critical infrastructure that makes developing and deploying AI technologies possible involves housing a huge amount of core components like GPUs in a centralized location called a data center.

Instead of building out their own infrastructure -- which would be costly, time-consuming, and full of redundancies -- AI start-ups simply rent compute space from data center operators, which allows them to keep costs low and scale dynamically as needed. So it's not so much AI companies that need the power directly, but the data centers that serve them.

Perhaps the biggest cost in operating a data center, at least when it comes to energy usage, is to cool the technological components like GPUs, which heat up during operation. Cooling these components improves performance and prevents damage. For this reason, many data center businesses are looking to construct facilities in cold, remote places like Alaska, or even in space, where cooling needs would be relatively lower.

So, data centers need energy sources that are quickly deployable and easy to scale in potentially remote places. That's why both hydrogen and small nuclear reactors have been promised as potential solutions. Both have challenges in real-world feasibility and operating costs. But for now, small modular reactors stocks like Oklo have the advantage. That's because, at least on paper, this technology can be deployed at lower expected costs than hydrogen. In fact, one of the most efficient ways of producing hydrogen fuel is actually to use SMR technology within the production process.

To be fair, both hydrogen and modular nuclear technologies face severe adoption, deployment, and economic feasibility challenges. But Oklo's approach is clearly AI-first, with a potential lead over hydrogen when it comes to the leveled costs of electricity -- a metric that accounts for every cost involved in producing a unit of energy. That's likely why Oklo already has deals lined up with big tech firms, while Plug Power has mostly inked smaller, logistics-based deals not involving entire data center operations.

Both stocks hold plenty of promise and risk. But I'm betting on SMR technology over hydrogen when it comes to supplying the AI industry with power. That makes Oklo the clear choice.

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