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Foreign.
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Companies are getting a power up. You're listening to Motley Fool Money. It is Monday, October 27th, and I am your host, Tim Byers. With me, our longtime fools, Nick Seiple, who also supports our Canadian services, and Seth Jason has been covering emerging tech as long as I have, maybe longer. Both have forgotten more about power in the energy markets than I will ever know, which is why it's great to have both of you here today. We want to talk about a different element of the AI story. And it's all AI, all the time, and it's exhausting. But we need to talk about how and where we'll get all the power needed to make sure our soon to be robot overlords are serving us well. So, Nick, let's start talking about the AI power problem here. I want to tee you up with this. Apparently we ought to be adding 80. I guess it's gigawatts. I don't know if it's gigawatts or gigawatts. I can't get any of this right. But of new power generation capacity a year to keep pace with AI, as well as cloud computing, crypto, industrial demand, and electrification trends. And this is according to a consulting and technology firm, icf. That sounds big. I mean, is this doable one? And if we do it, how do we do is doable?
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But you know, they say the most dangerous words in investing are this time is different. When it comes to the US Power grid, the era we're entering is different than the one we've been in for the past, call it 20 years. So if you look from 2005 to 2020, energy consumption in the US grew just 0.1%, essentially flat. For the better part of two decades. There were increases in electricity demand that were offset by things like efficiency improvements, structural changes in the economy. You've heard folks talk about the US shifting from a manufacturing economy to a service economy. All that has reduced the load needed on the grid over the past 20 years. Here as we enter the decade of the 2000s, that is changing with the emergence of AI in 2020 data centers as a portion of the overall electricity demand for the US grid were less than 2%. Now, if you look at current estimates out there, expected by the end of the decade to be somewhere between 9 and 12% of overall electricity demand. So we've gone from a regime where we've kind of been treading water maintaining the current grid to now we've had new, new sources of load coming on from AI that we're scrambling to, to meet that demand. That's why you're seeing basically all hands on deck. Whether it's, you know, Google signing deals for hydropower, Microsoft signing deals for renewable, reactivating existing nuclear plants, and what we'll talk about later, increasingly moving towards new small modular reactors, all trying to address the needs that are coming to the grid from AI.
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So Seth, you're my guy that I rely on for, you know, the reality check here. So tell me how big the gap is between what we say we're going to do with AI and bringing new AI capacity, I'm sorry, power capacity online to service all of this AI, like how big is.
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That's the question mark, right?
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Yeah. What's the cold cup of coffee here? Right?
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That's the question mark. If you look at what is being pledged to be built, it's probably much bigger than that 80 gigs that you said. I mean, every week Nick had the greatest line about this. Every week these AI CEOs are playing the congratulations, you said the biggest number game. I want to point out that they actually sell Doom as part of the pr. They do. So when they say like, oh, AI is an existential threat, they're really kind of trying to tell you that's how good their AI. When they try to tell you that AI is going to use up like all the power, they're really trying to convince you that that's necessary. Now we've seen a huge increase in demand and some of these data centers really do suck an enormous amount of power compared to prior ones. You're talking about even smaller ones, 100 megawatts or something small compared to what they're promising, using as much as entire towns used to use. And so this is really incredible. And then when you look at the product we get out of it, you might, because it's hard to be like, do we really need like AI videos? Do we need to use. You might ask yourself that question. So one of the things I think we don't know, and we won't know until we're kind of in the middle of building this, is how much demand there is really going to be. The reality is that electricity is really expensive. Even if you cut a sweetheart deal with somebody to get it cheaper, which most of these data center companies do. But as you both know, and everybody out there listening knows, AI efficiency is also a real thing. Every time Nvidia comes out with a new kind of era of chips, it uses a lot less energy. And then there's always software and other optimizations they're doing constantly every year. So what you have is basically two curves and they're kind of like, kind of picture them maybe as hockey sticks, maybe not, but they're kind of exponentially growing right now. You don't know when they're going to flatten into S curves, but where they cross over, one of them is like electrical demand from AI the other one is, is power generation that can survey. We don't actually know that. And so right now they're leaning heavily on trying to get gas to do most of this because that's, and that's the easiest way to get kind of a reliable baseload. But GE Vernova, what do they have, like a three year backlog, four year backlog right now in turbines. And by the way, they're publicly saying like we're building capacity but not that much capacity because we don't want to spend too much building capacity and overbuild capacity. We'd rather keep our fat profit margins. Thus everybody is saying we got to go back to nuclear.
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Yeah. So GE Vernova ticker is gev. And, and when you're referencing this, just to be clear, because I'm a dummy about this, when you say gas, you're talking about gas turbines.
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Gas turbines. And there are other makers. G Vernova is one of the premieres. And if you're in the US you're going to try to buy from them because you're probably going to have to pay a heck of a tariff on anything that comes from overseas.
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Yeah. All right, so Nick, we've, I have heard a lot from both of you in the prep for this. There is a whole boatload of discussion about nuclear. So I'm going to give you another stat here. Apparently this is Amazon saying that they have a, this is called apparently the Cascade Advanced Energy Facility. This is in Washington and it'll be built by apparently a utility called Energy Northwest. Amazon is going to fund this. It's going to deploy 12 small modular reactors. I guess these things are called SMRs. Tell me what an SMR is. Should I care? Where are we on the nuclear spectrum here?
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Yes, a small modular reactors, as the name might describe, are smaller reactors than your traditional large scale nuclear reactors of the past. Just for context, one of these large reactors, probably about a gigawatt of electricity generation. The small modular reactors, you're looking at 300 megawatts. And last, there's also microreactors that are in the kind of 10, 20, 30, 50 megawatt range, significantly smaller than these historical large Nuclear plants. The idea with these small modular reactors is that you can manufacture the components at a, at a centralized manufacturing hub and then ship those to the construction site and assemble them there. That saves some of the having to reinvent the wheel every time you invent one of these nuclear, every time you build one of these new large scale nuclear plants. One of the issues that we've seen, at least with reactor construction in the US going back the past 20 years, is these plants, because of, of the bespoke nature of them and that you're spinning up the, the nuclear workforce to support them, each time you build one tends to run a lot longer than the original estimates for deadline and also come in significantly over budget. The hope is with these small modular reactors you can get some of those costs under control, get a, get an order book in place and start to get some of that learning curve to bring down the cost. That's something that if you look in other markets like China, they've been able to build nuclear reactors back to back to back using the same workforce and bring down costs over time. The US hasn't had that same success. But the hope is with these new small modular reactors, you'll be able to, you'll be able to do that. Now there's dozens of designs out there and you know, you see more of them come to pub coming public in the public markets almost every week. It seems like in the past month or so. However, the companies that look most interesting to me are these private companies. X Energy is one of those you talk about. That's the company supplying the small modular reactor for Amazon. Amazon certainly supporting this was actually not going to be the first of a kind deployment of the X Energy reactor. The first of those is going to be with Dow Chemical in Louisiana. They have, the construction permit is now under consideration by the Nuclear Regulatory Commission, expects to have a final decision on that by November of 2026. And if they can get that moving forward, then you know, Amazon looks like it's going to have them an order book in place as we move into the2030s to hopefully bring those costs down and start stamping these things out.
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We're looking here at like behind the meter, right? We're talking about like co locating. Is that one of the differences with reactors, the idea that instead of this thing being out there on a grid or something and everybody can maybe get some of it, that some of these will be stuck like next to the factory, kind of like they might have their own battery backup or something kind of behind the meter? Right. So that they have their own load provider right there. That's some of the story with this, right?
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Yeah, that's an important factor as well. Right. You can fit these on existing sites near the data center and you get around competing with the retail electricity customer for this electricity. That's one of the challenges of attaching these large data centers to the grid is all of a sudden you're adding this additional large load that is competing with, you know, you and me trying to have hot water and keep the lights on and watch Monday Night Football and that sort of thing. To the extent that these, these large tech companies can fund these reactors, have them behind the meter, have them where they actually own the power, it can. Can potentially get around some of those, Some of those conflicts.
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We should point out that grid hookups for data centers, the lead time on those is right now a lot longer than even getting a gas turbine. Might take you three years to get a gas turbine. It might take you five years to get a grid hookup. That's where we are right now.
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I want to make sure I understand this properly. The idea here is behind the meter, meaning not on the grid. That's what we're talking about. Am I. Am I hearing you right?
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In some cases, yeah. In some cases that won't be the case. Like. Like up in Canada where they're adding to an existing nuclear plant with SMRs, those are presumably going to be, like, tapped into the plant, which is then feeding the grid. So this is a smaller one. Presumably you could have it behind the meter, providing just for you.
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Okay, already. This is incredibly complicated. Apparently there's a lot of rules around this. It sounds like there's also, if I've heard you correctly, there's a lot of potential configurations here as well. There's lots of things you can do with this. So talk to me a bit then, and maybe. Seth, I'll. I'll go to you on. On this one. How much do I want to believe, or should I believe that nuclear is going to play a role here in the AI build out? Because I have two things I've seen, and what you just said is one of the things, like, it takes a really long time. That's a thing. Another is that we're going to repurpose different facilities that either went dormant or didn't work. It looks like Brookfield Asset Management is doing one of those types of deals. And. And then we have maybe the worst thing I've ever heard in this entire setup, which is now we're going to have SPACs that are selling, I guess, the, the nuclear promise. One of these is a, a company called One Nuclear Energy, which is going to go public through spac. So what should I believe, Seth?
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Well, it, it's going to depend from, from place to place. I think Nick is right. Nick, whatever I, I communicate with him, he's always got kind of the soberest and the best ones to discuss. But this is really complex. You talked about that Brookfield deal. That is a site which, like, has been kind of sitting there empty and been getting rained on for, you know, what is it, nearly a decade. So even Brookfield has a, has a, an out. Like if they get there, they're going to say, woof, we can't use what's here. Apparently they can get out of it. On the other hand, restarting Palisades up on the shores of Lake Michigan is a much easier lift and they're on the way to doing that, to getting that nuclear plant restarted up there. And so, you know, they're working on restarting some Three Mile island capacity to. I believe it was Microsoft who did that. So it all depends, you know, it's really specific from case to case. And the issue is that, like Nick said, there's dozens of these SMR companies, a lot of them have super cool ideas. If you listen to what they're all saying, almost all of it sounds really good, but it's not nearly as simple as they all make it sound. And Nick has said a bunch of times, and I agree, most of these are going nowhere. A few of the better ones may get somewhere. I'm always on the side of it's going to be more expensive and take longer than people think, but I think some of it has to happen.
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Yeah. The VC Summer reactivation, Brookfield, I think it's a great illustration of where we are in the cycle. Just where we let off talking about we were in a period for, you know, multiple decades of stagnant energy demand. And that, that kind of coincided with that, the VC Summer. And we talked about as well that many of these projects go over budget and take longer than expected. And that's really what you saw with the VC Summer program, right? The initial expectation was that it was going to be $9 billion to complete the entire facility after, I think it was six years. They had reached their $9 billion milestone back in 2017, and they decided to abandon the project. Here we are in 2025 where we're looking for all hands on deck to get access to any possible type of energy capacity. We can and you see Brookfield, which owns Westinghouse, which went bankrupt after the previous project was canceled, coming back in to try to bring this facility online and just reflects the power needs of these AI data centers and that we'll take any additional power that we can find and that includes reactivating shutter nuclear plants and picking up sites that that had been, you know, abandoned mid construction. It's really all hands on deck trying to meet the power demand coming down the line. And I think today we're looking to reactivate all the sites that we can in place, keep you know, coal and gas plants that were set to be shuttered, extended to maintain that, that power production. But we're going to run out of that type of easy, easy to access, easy ish to access power capacity pretty soon. And as we move into the2030s, that's when you really will need these small modular reactors and really new forms of energy production to come online to meet the growing needs of AI. And that's not without even getting into. Right. I mean Jensen Huang and everybody is talking about that we're going to have humanoid robots in the2030s. We're going to have to power those things as well. So this is going to be a long haul towards just growing energy demand and more and more applications that are more and more power hungry.
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All right, well up next we'll talk about some fakers and maybe even a breaker or two. You're listening to Motley Fool Money. All right, we're back. We're going to play some faker or breaker. For those who don't know how this game works, it's very simple. We are going to talk about three companies. Three companies that are either a faker or maybe resemble a rule breaker. And a faker is a company that's growing really, really fast, but unsustainably so. Or there's a ton of hype around this that I mean it looks real in the moment, but it's a mirage. So three companies, you tell me, faker or breaker? Seth, I'll start with you. Oklo ticker. Ok lo faker or breaker? What do you think?
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I gotta give it faker. I read it and get some hate mail. I'm sure in any of this nuclear space, I want a company that is kind of knows what they're doing, has been around the block already. So all of these are going to come are going to ring up the catch register the wrong way. For me, this is, I love that everybody's so excited. New engineers are like, hey, we're two guys from mit we can come out and do a new slash old type of nuclear reactor but I'll believe it when I see it.
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Okay Nicholas, let's move on to another one here. We're sticking in in the nuclear, the nuclear sector. This feels a little cheeky to me. New scale Power and has decided to co opt the very clever ticker smr, faker or breaker. Are they the leader here?
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So I'm going to go faker. In some ways you could point towards nuscale as a first mover in small modular reactors. The company was founded in the early 2000s, was the first one of these small modular reactor companies to get licensed by the Nuclear Regulatory Commission in the US it actually has some amount of revenue unlike pretty much every other small modular reactor company on the public markets. That said, it's tied to a tall a small consulting contract in Romania. Its new scale small modular reactor design had some partners in Utah partnered with it. However, those folks pulled back pulled out back in 2023 after you know, surprise. The estimates for the costs of what these facilities would actually come in at came in significantly higher than any of its partners were willing to spend. That said, the stock has gone up a ton since then, again because of the hype around small modular reactors. But I don't think new scale is significantly closer to deploying a reactor today than it was five years ago. And it's in a very, very crowded field.
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All right, Seth, you close this out here. Nano Nuclear energy Ticker NNE faker breaker.
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Still a faker to me. It combines two of my favorite things blast from the past. Nano. I feel like I'm back in 2005 when Nanotechn was a very hot topic and just about every company you looked at that had the word nano in it was something you needed to scream and run away from. Like Nick said, most of these have not much in the way of revenue if anything. And again, I'll believe it when I see a little more proof of projects.
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Fair enough. I mean what I'm hearing is that this is something that is really going to accelerate into 2030 but in 2025 maybe slow your roll just a little bit.
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If I was going to talk about the designs that today that I think have a chance to win. I mean many of them aren't independently publicly traded companies, but small modular reactors under construction in North America today. There's the BWR X300 design being built in Darling at the Darlington site in Canada. That is a GE Hitachi design. JI Hitachi part Partially owned by GE Vernova, the big, the big gas turbine manufacturer. BW X Technologies, a company I've talked about in the past, is one of the key suppliers for building that, that reactor. Getting a lot of support from the Canadian government. I think that's one design to look at. The other area I would look at as well are, you know, designs that are working together with, with the US military. Last month, actually earlier this month, I believe the army announced Project Janus which will seek to deploy small modular, excuse me, microreactors at US military bases here in the next couple of years. There were eight companies selected as potential contributors to that and I think those would be the companies to look at. Just to list those out, it's Antares Nuclear, BWX Technologies, General Atomics, Kairos Power, which is partnered up with Google, Oklo, which we talked about earlier with some, a little bit of a side eye Radiant Industries, which actually has a reactor design under construction that will, that will supply an Air Force base here in the coming years. Westinghouse Government Services, which is again that, that Brookfield affiliated entity that is participating in the reconstruction of the VC summer site and X Energy, which is again contracted with Amazon that we talked about earlier. Most of these companies are private, but I think if you point, if you look to what the military is doing, it can give you a, give you a, a sign of some of these areas where we might see construction earlier than some of these, I guess, SPACs that have come public in recent months.
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All right, up next we take a look at what's coming down the pike this, this week. Lots of earnings. You're listening to Motley Fool Money. All right, Fools it is. It's earnings week. Of course it's going to be earnings week for the next few weeks. So let's quickly go around the horn here before we preview tomorrow. So Seth, an earnings report you're looking forward to this week. Who's reporting? Who do you got?
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A couple and they're pretty different. Cadence, selling the software that is used to design chips. Interested to see what their ticker K's CDNs but their demand looks like and they've been, you know, they've been subject of terror fights and Nucor, I'm interested to see what steel demand is like and what profitability is or isn't like given their kind of advantaged tariff situation since they're, you know, in the US.
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Here and Nucor Ticker Nue, excellent. Nick, what do you got?
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Yeah, I'll be looking at Dexcom Ticker's DXCM. They'll release their third quarter earnings results on October 30th. Dexcom, one of the leaders in continuous glucose monitoring devices in a duopoly with Abbott Labs Freestyle Libre system. Dexcom has had a challenging last few quarters. Last year, lots of pressure from the onset of GLP1 drugs. This year, some execution missteps as they've transitioned from selling in the durable medical equipment channel to now selling primarily through the pharmacy channel. And then their CEO and chairman Kevin Sayre had to take a leave of absence last month for medical reasons. So this is a time where a solid earnings report could really reset the narrative around a business that I think has lots of growth potential in the years to come.
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I like it. I'm going to say Microsoft. I mean, I'm endlessly fascinated by Microsoft anyway, but I want to hear what they have to say if they're going to say anything about the OpenAI relationship.
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Probably.
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I mean, maybe, maybe not. I don't know. But I just want to hear more. Plus, I. I'm very curious to see how much they spend. All right, for tomorrow, will the government shutdown cause more concern for investors? What are we learning from the latest earnings reports? Emily Flippin, Jason hall and Keith Spice will walk you through on tomorrow's edition of Motley Fool Money. So please stay tuned for that. As always, people on the program may have interest in the stocks they talk about, and the Motley pool may have formal recommendations for or against. So please don't buy or sell stocks based solely on what you hear. All personal finance content follows button full editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. See our full advertising disclosure. Please check out our show notes. So, Seth, Nick, thanks for joining me. Our engineer today, as always, Dan Boyd and our producer, Anand Chuck Lou For Seth, Jason and Nick Seiple, I'm Tim Byers. Thank you for listening to Motley Fool Money. We'll see you next time. Fools.