Powering the AI Revolution: How Small Modular Reactors Could Be the Key Enabler
AI’s compute needs, as explored in last week’s “AI’s Compute Boom Is Testing the Power Grid in North America” is putting unprecedented strain on our electrical grids. Data centers, the physical engines of this revolution, are consuming power at rates that threaten to cap AI’s growth not by chips or data, but by the sheer availability of electricity. This escalating demand has forced tech giants to eye innovative, reliable power solutions beyond traditional renewables or fossil fuels. Enter Small Modular Reactors (SMRs): an evolution in nuclear energy that has the potential to reshape our power landscape and, critically, fuel the electron appetite of artificial intelligence, potentially transforming a looming energy crisis into a new era of sustainable compute.
Nuclear's Evolution
Nuclear energy, which provides about 9% of the world's electricity, harnesses heat from splitting atoms, a technology that has evolved significantly since its inception.
Generation I Reactors: The Foundational Designs (1950s-60s)
These early prototypes, using natural uranium and graphite, proved nuclear power's feasibility. All have since been retired, with the last ceasing operation in 2015.
Generation II Reactors: The Workhorses of the Global Nuclear Fleet
Beginning in the late 1960s, Generation II reactors, which make up much of the current US fleet, were designed for economy and reliability, with 40-year operational lives often extended to 60 or even 80 years. These reactors depend on active safety systems that require external power or human intervention. High-profile incidents like Chernobyl and Fukushima, both etched into public consciousness and pop culture, underscored the need for safer, more resilient designs.
Generation III Reactors: Evolutionary Improvements over Gen II
Generation III reactors, operational since the mid-1990s, offer evolutionary improvements over Gen II, including enhanced passive safety, higher thermal efficiency, and standardized designs for a 60-year operational life . They boast significantly lower core damage frequencies and more efficient uranium use. Despite these advancements, widespread adoption in Western countries has been limited, setting the stage for SMRs to address economic and siting challenges.
SMRs: A New Dawn for Clean Energy
SMRs are compact, factory-built nuclear reactors designed for faster, cheaper, and safer deployment. They are built to meet modern energy demands at scale, with features that make them well-suited for the future of energy.
Faster to build: Factory-made components cut construction time nearly in half, and more units can be added as demand increases.
Built-in safety: Passive systems use natural forces like gravity and convection to cool the reactor with little or no human input. Some designs are built underground for added safety.
Lower cost: SMRs have smaller upfront costs and shorter timelines than traditional nuclear plants, helping reduce financial risk.
Flexible siting: Their compact size and lower water needs make them suitable for remote locations, small grids, or replacing old fossil fuel plants.
Multiple uses: In addition to electricity, SMRs can supply heat for industry, support district heating, produce hydrogen, and provide steady power alongside wind and solar.
SMRs and the AI Data Center Boom: A Potentially Symbiotic Relationship
Directly Addressing AI's Power Demands: SMRs as a Consistent, Carbon-Free Baseload Power Source
AI data centers' escalating power demands, projected to double to 950 TWh by 2030, require over $170 billion in new generation capacity. SMRs offer consistent, 24/7 baseload power, crucial for uninterrupted data center operation, and produce zero carbon emissions, supporting sustainability goals. Their high energy density provides substantial power from minimal fuel, uniquely resolving the AI energy trilemma of scale, reliability, and decarbonization.
Impact on Grid Strain: How Localized SMR Deployment Can Alleviate Pressure on Existing Transmission Infrastructure
AI compute growth is severely straining grids, with US data centers potentially drawing 8% of national electricity by 2030 and outpacing grid expansion. SMRs can be installed behind the meter for data centers, reducing the need for extensive transmission infrastructure and alleviating pressure on existing grids. This distributed energy model mitigates bottlenecks, enhances resilience, and improves energy security for critical AI infrastructure.
Tech Giants Leading the Charge: Specific Examples of Investments and Partnerships
Major tech companies are strategically investing in SMRs to secure reliable, carbon-free power for their AI operations:
Microsoft: Partnered with Brookfield for renewable energy and is helping restart Three Mile Island Unit 1 by 2028 for its data centers. Also partnered with TerraPower for SMR development by the early 2030s.
Amazon: Invested $500 million in SMR startup X-Energy and plans collaborations with utilities in Washington and Virginia for SMR development. Also secured a 1.9 GW power purchase agreement from Talen Energy's nuclear plant.
Google: Partnered with Kairos Power to deploy SMRs for data centers by 2030, targeting up to 500 MW of advanced nuclear reactors by 2035. This was hailed as the world’s first corporate purchase agreement for nuclear energy from SMRs .
Meta: Signed a 20-year deal for 1.1 GW from Constellation Energy’s Illinois reactor, effective 2027.
These moves reflect a growing recognition that sustainable, scalable energy has become a competitive differentiator, and they are helping to create a strong commercial foundation for SMR development and deployment.
The Road Ahead: Challenges, Opportunities, and the Venture Landscape
Regulatory Hurdles & Progress
More than 80 SMR designs are in development across 18 countries, though most remain in the pre-FEED (early project design and planning) stages. The only operational SMRs to date are primarily Generation II models in China and Russia. In the US, NuScale Power’s 50 MWe SMR was approved by US regulators in early 2023, followed by a larger 77 MWe version in 2025. In Canada, the first GE Hitachi BWRX-300 SMR is scheduled to begin construction in 2025, with commissioning expected in 2029. While national regulatory approaches vary, international efforts to harmonize standards are underway to help streamline global SMR adoption.
Cost Competitiveness & Financial Risks
Supporters of SMRs believe that modular construction could help reduce costs over time. Still, recent data suggests renewables remain cheaper today. According to Lazard’s 2025 report, the US Energy Information Administration estimates that advanced nuclear could cost around $134 per megawatt-hour by 2030, while solar and wind are projected to cost around $32 and $30, respectively. Some critics argue SMRs are still too expensive and slow to build. The cancellation of NuScale’s Carbon Free Power Project, after costs rose from $58 to $89 per megawatt-hour, raised concerns; however, many experts suggest that this was more about financing than the technology itself. Early SMR projects are expected to be costly, but later units could become more affordable as experience grows and supply chains scale.
Waste Management Considerations
Nuclear waste management remains a concern. Some research suggests SMRs could increase waste volume by factors of 2 to 30 due to increased neutron leakage and activated structural materials, potentially producing more complex and radiotoxic waste. Conversely, proponents argue SMRs will create less waste or that advanced designs can recycle waste into usable energy. The US currently lacks a deep geologic repository for high-level waste.
Public Acceptance
Public awareness of SMRs remains low, and many North Americans remain skeptical. Past disasters and decades of negative associations have left a lasting mark, reinforcing a strong “not in my backyard” culture. Regardless of how safe the technology is or how many redundant safety features are built in, public trust and acceptance of nuclear power remain significant challenges.
Venture Capital Trends & Market Tailwinds
SMRs are beginning to attract steady capital from a mix of venture firms, tech companies, and government agencies. Once considered a speculative space, tucked away in research labs and reserved for the most forward-thinking deep-tech funds, there is an argument to be made that next-generation nuclear is now seen as a credible solution at the intersection of energy infrastructure and climate technology.
X-Energy: Closed a $700 million Series C-1 round in February 2025, led by Amazon's $500 million investment.
Radiant Industries: Secured $100 million Series C funding in November 2024.
Last Energy: Completed a $40 million Series B round in August 2024, with agreements for over 80 reactor units in Europe.
TerraPower: (Bill Gates-backed) received $80 million in DOE funding and over $830 million in private funds by 2022.
Kairos Power: (Google's partner) received $303 million from the DOE.
NuScale Power: The only NRC-certified SMR design, received a $1.35 billion DOE grant and a $227.7 million cash infusion in December 2024.
Oklo: (Sam Altman-chaired) went public in May 2024 with an $8.88 billion market cap.
This "flywheel effect" of tech demand, venture capital, and government support is accelerating SMR development, creating unprecedented market potential.
Fueling a Sustainable AI Future?
As AI workloads scale and data centers strain the grid, energy is quickly becoming a gating factor. SMRs offer a practical path forward, providing steady, carbon-free power where it’s needed most. With major tech firms already committing capital, the momentum is shifting from exploration to deployment.
The key challenge ahead is execution. Success will depend on bringing down costs, speeding up permitting, and earning public trust. But the direction is clear: solving the energy constraint is essential for AI’s continued growth.
SMRs won't solve every infrastructure issue, but they could unlock a more resilient and scalable foundation for AI. For tech and energy leaders alike, getting this right has quickly become a priority.