AI's Insatiable Energy Appetite: How Nuclear and Utilities Are Powering the Next Tech Revolution

Research Report | October 2025

Axum Group of Companies - Investment Research Division

The artificial intelligence revolution faces a fundamental constraint that most investors overlook: electricity. While semiconductor stocks have captured headlines, a more profound transformation is occurring in the energy sector as data centers powering AI threaten to reshape North American power grids and create unprecedented investment opportunities for utility companies.

The Scale of the Energy Challenge

The numbers are staggering. According to the International Energy Agency, global data center electricity consumption will more than double from approximately 415 terawatt-hours (TWh) annually today to 945 TWh by 2030. To put this in perspective, that's equivalent to Japan's entire current electricity consumption. Goldman Sachs Research projects an even sharper trajectory: global power demand from data centers could rise 165% by 2030 compared to 2023 levels.

The surge is driven almost entirely by AI workloads. A single AI-generated image consumes up to 10,000 times more energy than a Google search. Training large language models requires as much electricity as 1,000 U.S. homes use annually. As former Biden administration energy adviser Amos Hochstein warned in October 2025, "We have a huge gap on energy and AI. If things don't happen soon, it will become a crisis".

For Canadian investors, this creates a strategic opportunity at the intersection of technology infrastructure and energy generation—particularly for companies positioned to deliver the reliable, 24/7 power that AI data centers demand.

Why Nuclear Is Winning the AI Energy Race

Unlike solar or wind power, which fluctuate with weather conditions, AI data centers require constant, uninterrupted electricity. This makes nuclear power the ideal energy source for tech giants pursuing both aggressive AI expansion and net-zero carbon commitments.

Nuclear's competitive advantages are compelling. With a capacity factor exceeding 92.5%—far outpacing wind (35%), solar (25%), and natural gas (56%)—nuclear plants provide ultra-reliable baseload power. A single nuclear facility can generate approximately 1 gigawatt on average, enough to power five 200-megawatt data centers with virtually zero operational emissions.

Constellation Energy CEO Joe Dominguez captured this reality bluntly: "It's pretty clear that nuclear simply wins the match in every single dimension. Cost, reliability, [and] predictability of firm prices for twenty years". His company, which operates the largest nuclear fleet in the United States with 21 reactors across 12 facilities, has positioned itself at the center of the AI energy boom.

Tech Giants Lock Down Decades of Nuclear Power

The urgency is visible in the unprecedented power deals being struck between technology companies and nuclear operators. In September 2024, Microsoft signed a 20-year agreement with Constellation to restart Three Mile Island's Unit 1 reactor (renamed the Crane Clean Energy Center), committing to purchase 835 megawatts of carbon-free electricity starting in 2028. The deal required Constellation to invest $1.6 billion to revive the dormant reactor.

Meta followed in June 2025 with its largest power agreement ever: a 20-year contract to purchase the full 1,121-megawatt output of Constellation's Clinton Clean Energy Center in Illinois starting mid-2027. Amazon acquired a data center campus directly connected to Talen Energy's 2.5-gigawatt Susquehanna nuclear plant in Pennsylvania for $650 million.

These aren't isolated transactions. They represent a fundamental shift in how hyperscale tech companies are securing energy infrastructure. The "colocation" model—where data centers connect directly to nuclear plants, often bypassing the traditional grid—allows for faster deployment and guaranteed clean power.

The Canadian Opportunity: TransAlta and Beyond

For Canadian investors who read our previous analysis of TransAlta's positioning in the data center energy market, this global trend has direct implications closer to home. Alberta is aggressively pursuing $100 billion in AI data center infrastructure over the next five years, and TransAlta is negotiating with multiple hyperscalers interested in building data center campuses across the province.

TransAlta CEO John Kousinioris revealed in May 2025 that the company expects to reach definitive agreements with data center partners by year-end, with facilities operational 18 to 24 months after signing. The company plans to supply approximately 90% of a data center partner's electricity needs through natural gas-fired generation. While TransAlta lacks the nuclear assets that have made Constellation a market darling, its strategy of partnering with data centers for "behind-the-meter" power arrangements positions it to capitalize on Alberta's deregulated electricity market advantage.

This directly connects to our previous TransAlta analysis: the company's existing generation capacity, strategic positioning near major Alberta grid connections, and willingness to provide dedicated power to data centers makes it a viable play on Canada's AI infrastructure buildout.

Canada's Broader Nuclear and Renewable Energy Edge

Beyond TransAlta, Canada offers compelling structural advantages for meeting AI's energy demands. The country has abundant renewable resources, stable energy infrastructure, and currently hosts 239 operational data centers with more under construction. Hydro-Québec anticipates a 4.1 TWh increase in electricity demand from data centers between 2023 and 2032—equivalent to roughly 2% of the province's total electricity production.

The Canadian government has demonstrated serious commitment to nuclear expansion, announcing over $1.4 billion in investments for small modular reactor (SMR) development and CANDU reactor modernization in March 2025. Ontario Power Generation received federal approval to construct the first grid-scale SMRs in North America at the Darlington site, with the first 300-megawatt unit expected online by 2030.

Brookfield Renewable Partners stands out as another major beneficiary. In October 2025, Brookfield announced a $5 billion strategic partnership with Bloom Energy to deploy fuel cell technology across global AI data centers. This follows Brookfield's existing portfolio of hydroelectric, wind, solar, and nuclear assets positioning it as a vertically integrated clean energy provider for the AI era.

The Investment Thesis: From Semiconductors to Power Generation

While investors have poured capital into AI chip manufacturers and software companies, the energy infrastructure supporting AI represents an overlooked layer of the value chain with more predictable cash flows and longer contract durations.

Consider the financial transformation at Constellation Energy. The company's stock surged 91% in 2024, making it one of the top performers in the S&P 500. In January 2025, Constellation announced a $26.6 billion acquisition of Calpine Corporation, creating the nation's largest clean energy provider with nearly 60 gigawatts of combined capacity across nuclear, natural gas, geothermal, hydro, wind, and solar. The deal is projected to be immediately accretive, adding over $2 billion in annual free cash flow and creating 20% earnings-per-share accretion in 2026.

This merger exemplifies the consolidation trend in the power generation sector as utilities race to meet unprecedented demand. Constellation's coast-to-coast footprint—spanning key markets including Texas (the fastest-growing power demand market), California, Pennsylvania, and Virginia—positions it to serve multiple hyperscale data center hubs.

Connecting the Dots: Why This Matters for Your Portfolio

The AI energy story connects directly to the TransAlta investment thesis we explored previously. Both narratives center on a simple reality: AI cannot scale without massive, reliable electricity supply, and companies controlling that supply will capture enormous value.

For growth-oriented investors, Constellation Energy represents the purest play on AI energy demand, with established nuclear assets, long-term contracts with Microsoft and Meta, and aggressive expansion through the Calpine acquisition.

For Canadian exposure, TransAlta offers a compelling entry point into Alberta's data center buildout, while Brookfield Renewable Partners provides diversified global clean energy infrastructure with significant AI-related fuel cell initiatives.

For income investors, these utilities are increasingly signing 20-year power purchase agreements with investment-grade tech companies, creating predictable revenue streams that support sustainable dividend growth.

The key insight is recognizing that AI's energy crisis is not a constraint but an investment catalyst. As Bain & Company estimates, scaling AI will require approximately $2 trillion in new energy generation investments. Those investments will flow to companies with existing generation capacity, regulatory expertise, and the financial strength to build at scale.

Risks and Considerations

No investment thesis is without risks. Regulatory uncertainty remains significant, particularly around colocation arrangements where data centers bypass the grid. The Federal Energy Regulatory Commission (FERC) has initiated reviews of colocation agreements amid concerns about electricity costs and grid reliability.

Additionally, construction timelines remain long. Nuclear projects require at least a decade to bring new capacity online, gas turbines have five-year order backlogs, and even solar installations face 18-month lead times. This supply-demand mismatch could constrain AI growth or push companies toward less environmentally friendly solutions.

There's also demand uncertainty. While projections are bullish, the actual scale and timing of AI data center growth beyond 2030 remains unclear. If AI adoption proceeds more slowly than anticipated, utilities could face overbuilt capacity and stranded assets.

The Bottom Line

The collision between AI ambitions and electricity realities is creating once-in-a-generation opportunities in the utility sector. Companies like Constellation Energy, TransAlta, and Brookfield Renewable Partners are no longer boring defensive stocks—they're critical infrastructure providers enabling the most transformative technology trend of our era.

For investors who recognized the data center thesis in our TransAlta analysis, the nuclear and broader utility opportunity represents the next logical evolution of that investment theme. As Microsoft, Meta, Google, and Amazon collectively commit hundreds of billions to AI infrastructure, the companies powering those data centers will capture significant value through multi-decade contracts with the world's strongest balance sheets.

The energy bottleneck facing AI isn't going away. The question for investors is whether they'll position their portfolios to benefit from the inevitable solution.

About Axum Holdings

Disclaimer: This content is for informational purposes and is not investment advice. Past performance does not guarantee future results. All investing involves risk. Consult a professional before making major investment decisions.

About Axum Holdings: Founded in 2012, Axum is a private investment holding company focused on steady cash flow and long-term value through diversified holdings.