Modular Reactors: “Not Good Businesses,” Says Josh Wolfe
The rapid growth of artificial intelligence (AI) has highlighted an insatiable demand for electricity, leaving the world scrambling for sustainable energy solutions. Among the options being explored, nuclear energy has emerged as a potential answer, drawing significant attention from tech giants and investor alike.
In October, Google, Amazon, and Microsoft made headlines by announcing plans to power their AI operations with mini-nuclear plants. Microsoft struck an earlier deal with Constellation Energy for nuclear power, signaling the industry’s growing interest in this energy source.
The nuclear sector has also seen impressive stock market gains this year. NuScale Power (SMR) is up 538% year-to-date, Oklo (OKLO), backed by OpenAI CEO Sam Altman, has surged 123%, and Nano Nuclear Energy (NNE), a recent listing, has climbed 99%.
However, Josh Wolfe, co-founder of Lux Capital, urges caution. In a December post on X (formerly Twitter), Wolfe revealed he had recommended shorting stocks like Nano Nuclear, Oklo, and NuScale at a private investor event.
While Wolfe is a proponent of nuclear energy, he argues that announcements from companies like Microsoft, Meta, and Amazon are largely about “greenwashing” to meet carbon commitments. He predicts delays and underwhelming economic returns for small modular reactor (SMR) projects, despite their technological promise and current stock market success.
“They are amazing technology and, in the short term, have been amazing stocks, but I do not believe they are good businesses,” Wolfe explained. He favors large-scale nuclear projects and abundant natural gas, particularly from regions like the Permian Basin, as more viable solutions.
Wolfe predicts that headlines in 2025 will reflect slow progress for SMR companies, with phrases like “OKLO gets approval…to study a site…to possibly build” or “Amazon enters agreement to…possibly buy…if [SMR company] ever builds.”
Meanwhile, hedge funds have been pouring money into nuclear power producers, anticipating a surge in electricity demand from AI. Goldman Sachs highlighted Vistra (VST) and Talen Energy (TLN) as hedge fund favorites during Q3.
Market Outlook
Thursday’s early stock index futures are trending down in holiday-thinned markets, with the Nasdaq, S&P 500, and Dow Jones futures all slipping. In contrast, Japan’s Nikkei closed up over 1%, showing regional variations in market sentiment.
As AI continues to reshape energy demand, the debate over the viability of modular nuclear reactors versus large-scale solutions is likely to remain at the forefront.
