Last month, utility company Constellation Energy plans unveiled to restart one of the two nuclear reactors at the Three Mile Island power plant in Pennsylvania.

On the surface it doesn’t mean much. The world needs more electricity right now. Nuclear energy is a quickly accessible, cheap option.

However, there was a curious detail in Constellation’s press release. That is, the electricity it will generate, although it will be connected to the national grid, is largely intended to power AI data centers operated by software giant Microsoft. The news underlines the fact that data centers are energy-hungry, and increasingly so as companies grow. Goldman Sachs believes that data center energy consumption will grow 160% between now and 2030, but it’s just getting started.

However, the restart of Three Mile Island’s 800 megawatt reactor is only an emergency measure. The future of nuclear energy will likely be determined by so-called small modular reactors, which is exactly what they sound like: nuclear power plants that are easy to build and cost-effective to operate. Perhaps most notably, they can be deployed near where the electricity they generate is used, rather than delivering their electricity through the grid.

Two specific companies are poised to take advantage of this rapidly growing opportunity.

Small modular reactors are the real deal

This is not merely theoretical thinking either. Just this past week Alphabet as well as Amazon have announced plans to purchase electricity generated by small modular reactors (or SMRs) to power their AI data centers. Industry research organization Wood Mackenzie estimates that the SMRs already under construction will eventually be able to produce more than 22 gigawatts of electricity. That’s enough to power more than 16 million homes, or probably at least a slew of data centers.

But even before the first of these power plants becomes operational, more are likely lining up awaiting their success. IDTechEx reports that the annual SMR market will be worth more than $72 billion per year by 2033, on its way to $295 billion by 2043. That’s an annualized growth rate of 30%.

It almost sounds at fantastic. In any case, the complicated logistics of the SMR movement is a limiting factor.

However, there are many factors that work in favor of the small modular reactors, which are so much more powerful.

Image source: Getty Images.

Chief among these factors are carbon-neutral power targets that are evolving into outright mandates. While nuclear energy may have a tarnished reputation due to the high number of catastrophic (or near-catastrophic) accidents, it is do work and can be safe using more modern reactor designs and better-founded standards.

Another driving force is the way and reasons why energy is created and then used. Modular reactors are viable for generating energy on-site at facilities such as mines, refineries and desalination plants, or even for generating the heat needed for smelters, many of which still burn coal.

SMRs also show particular promise as a means of producing pure hydrogen, which is used in fuel cells to create clean electricity. The stumbling block is precisely the amount of raw energy required to even split water into its two atomic elements (hydrogen and oxygen). With nuclear energy there is plenty of clean energy left over from splitting water molecules.

Two ways to play

So it is a work in progress. However, the core opportunities are starting to take shape. Two stand out from the rest.

First, with the creation and consumption of nuclear energy set to increase in the near future, the world will need more nuclear fuel, primarily uranium-238. BMO Capital Markets expects global uranium consumption to grow by almost 3% per year until 2035.

That’s not huge growth, but given that supply and demand dynamics are driving continued price increases, uranium prices could continue to rise.

Uranium Spot Price Data according to YCharts

There are a handful of publicly traded uranium miners Uranium energy (UEC 0.71%) and Australia’s diversified miner BHP Group Limited. But perhaps your best choice is a company called Cameco (CCJ 0.03%). It is one of the world’s largest suppliers of high-quality uranium. Last year it sold $2.6 billion worth of nuclear fuel, of which $339 million turned into net revenue thanks to its low costs. It also sits on nearly 500 million pounds of material, waiting to be excavated.

Small modular reactors are of course the other major opportunity. Nano nuclear energy (NNE 17.84%) And Okay (OKLO 17.36%) are a few SMR manufacturers that might be worth putting on your radar. A company called NuScale power (SMR 7.20%)however, is arguably further ahead than any other outfit in terms of monetization.

This optimism wasn’t felt a year ago when Utah Associated Municipal Power Systems canceled plans with NuScale to establish what would have been the nation’s first SMR. However, it was not entirely an indictment of the idea being put forward at the time. NuScale is still working on nearly a dozen other small modular reactor projects – here and abroad – with intrepid partners.

The reward is tailored to the risk

There is certainly a risk here.

Again, while nuclear power itself is well proven, small modular reactors are not; potential partners may adopt a wait-and-see attitude, prolonging the adoption process. Additionally, while NuScale is the only company with an SMR design approved by the U.S. Nuclear Regulatory Commission for use in this country, this particular 50-megawatt reactor design is not the 77-megawatt version that NuScale Power ultimately hopes to offer. Even if the new model is approved, that approval won’t happen until mid-2025, clouding the bullish argument.

However, waiting for absolute certainty before taking action also leaves money on the table. The time to take your photo on less than fully gelled terrain is for they become obvious opportunities. Once they are clear, much of the future profit is in the rearview mirror.

Given the fluidity of the movement, we cannot of course rule out that a new name will emerge as an important player in the field of nuclear energy. Keep your eyes open for that possibility too.