The AI Nuke Trade: Risks Investors Should Know
Josh Wolfe: Modular Nuclear Reactors Are ‘Not Good Businesses’
As artificial intelligence (AI) continues to expand, so does its insatiable appetite for electricity. This demand has tech giants and investors turning to nuclear energy as a potential solution.
In October, Google, Amazon, and Microsoft announced plans to leverage mini-nuclear plants to meet their AI power needs. Microsoft had already partnered with Constellation Energy, while Meta recently issued a request for proposals (RFP) to nuclear developers to support its AI and clean energy goals.
The nuclear sector has seen a surge in investors interest, with companies like NuScale Power (SMR), Oklo (OKLO), and Nano Nuclear Energy (NNE) delivering impressive stock market gains. Year-to-date, NuScale’s stock has soared 538%, Oklo has risen 123%, and Nano Nuclear, a recent entrant to the market, is up 99%.
However, Josh Wolfe, co-founder of Lux Capital, urges caution. While he supports nuclear energy, he questions the economic viability of modular nuclear reactors (SMRs). In a December post on X (formerly Twitter), Wolfe revealed that he had recommended shorting stocks such as Nano Nuclear, Oklo, and NuScale during a private investor event.
“I’m a fan of nuclear energy,” Wolfe said, “but the hyperscaler announcements from Microsoft, Meta, and Amazon are more about greenwashing to meet carbon commitments. The 3-10 year RFPs for nuclear won’t unfold as people expect.”
Wolfe criticized the hype surrounding SMRs, suggesting that while they are groundbreaking technology and have driven short-term stock gains, they may fall short as sustainable businesses. His preference lies with large-scale nuclear projects and abundant natural gas resources, particularly in the Permian Basin.
He predicts slow progress for SMRs, with 2025 headlines likely featuring phrases like “OKLO gets approval to study a site to possibly build” or “Amazon enters agreement to potentially buy from [an SMR company] if it ever builds.”
Hedge funds have taken notice of nuclear energy’s potential, with a Goldman Sachs report highlighting significant investments in nuclear power producers during Q3. Vistra (VST) and Talen Energy (TLN) have emerged as popular picks, reflecting growing anticipation of AI-driven electricity demand.
Market Overview
Amid holiday-thinned trading, stock index futures are sliding early Thursday, with the Nasdaq, S&P 500, and Dow Jones all dipping. Meanwhile, Japan’s Nikkei closed with a gain of over 1%, underscoring regional market dynamics.
As AI’s energy demands grow, the debate over small modular reactors versus large-scale nuclear solutions will likely intensify, shaping the future of energy investment.
