When considering artificial intelligence (AI), concepts like self-driving cars and humanoid robots often come to mind. However, it is essential to focus on the actual process of bringing products to life whenever a new trend emerges. Sometimes, the most lucrative opportunities are not immediately apparent.
For AI to function effectively, companies must make significant capital expenditures (capex) investments in data centers. While data centers may appear to be simple real estate, they play a crucial role in housing essential IT infrastructure, such as graphics processing units (GPUs) needed for generative AI applications.
Currently, Nvidia dominates the data center sector, but there is another opportunity that stands out as a superior choice for data center investments, and surprisingly, it is not a technology company.
Exploring unconventional options is crucial. Let’s delve into a nuclear energy stock that could potentially become the most significant data center company in the long run and why this presents a promising opportunity for investors.
Nuclear-powered data centers are gaining traction…
AI promises enhanced efficiency across various applications, from enterprise software advancements to autonomous vehicles. While this is exciting, it also comes with significant trade-offs. Building AI applications is an expensive endeavor, with GPU hardware and high-performance computing software being major expenses. Another subtle but critical cost in AI development lies in data centers and their energy consumption.
GPUs constantly run complex algorithms and high-level computing tasks, consuming a substantial amount of energy and generating heat. Data centers require various temperature control mechanisms, such as air conditioning units, fans, and generators, which can be costly and inefficient. A rising trend at the intersection of data centers and energy consumption is nuclear power, attracting notable companies and business leaders.
…with major players entering the field
One prominent company venturing into nuclear-powered data centers is Amazon. A significant part of Amazon’s business is its cloud computing platform, Amazon Web Services (AWS). Recently, AWS acquired a nuclear-powered data center from Talen Energy for approximately $650 million.
Another player making strides in the nuclear power sector is Oklo. Oklo specializes in nuclear fission reactors that it intends to sell to data centers and utility companies.
Previously a private entity, Oklo secured funding from notable figures like Peter Thiel and OpenAI co-founder Sam Altman. Recently, Oklo went public through a special purpose acquisition company (SPAC).
According to their investor presentation, Oklo has garnered interest in their reactors from major corporations, including Diamondback Energy, Equinix, Siemens Energy, and even the U.S. Air Force.
Despite the attention and support from Altman, investing in Oklo at this stage carries significant risk. The company has yet to generate revenue, and potential deals are in early negotiation stages, necessitating substantial ongoing research and development costs that could strain liquidity without significant sales.
My top choice in the nuclear energy and data center realm is…
Among nuclear power providers for data centers, my preferred pick is Constellation Energy (NASDAQ: CEG). The company offers various energy services but has placed a specific emphasis on sustainability and nuclear energy.
One of Constellation’s notable nuclear power clients is “Magnificent Seven” member Microsoft. During a recent earnings call, CEO Joseph Dominguez mentioned Comcast and Johns Hopkins as other significant customers benefiting from Constellation’s carbon-free energy services.
As more major tech companies follow in the footsteps of Amazon and Microsoft, Constellation’s diverse client base highlights the broader appeal of green energy beyond data centers and tech giants.
Investors with a long-term outlook may find Constellation Energy a compelling investment opportunity. With nuclear energy solutions poised to gain prominence alongside the development of AI, Constellation Energy, in my opinion, presents an undervalued and overlooked option in the realms of AI, data centers, and energy consumption.
Should you invest $1,000 in Constellation Energy right now?
Before considering an investment in Constellation Energy, take note:
The Motley Fool Stock Advisor team has identified what they believe to be the 10 best stocks for investors to buy now… and Constellation Energy did not make the cut. The 10 selected stocks have the potential to deliver significant returns in the coming years.
Consider this: when Nvidia was recommended on April 15, 2005, an investment of $1,000 at that time would now be worth $722,320!*
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adam Spatacco holds positions in Amazon, Microsoft, and Nvidia. The Motley Fool holds positions in and recommends Amazon, Constellation Energy, Equinix, Microsoft, and Nvidia. The Motley Fool recommends Comcast and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Forget Nvidia: This Other Stock May End Up Being the Most Important Data Center Opportunity of All, and It’s Not a Technology Company was originally published by The Motley Fool