Cometh The Hour
Big tech and big banks throw their support behind nuclear energy.
“If you would know the value of money, go and try to borrow some.” – Benjamin Franklin
A rock-solid adage of venture investing is that all the deals are undersubscribed except for the ones that are oversubscribed. As such, a handsome living can be made by simply slipstreaming behind term sheets negotiated by others when you know that everybody else knows that the underlying startup will soon raise again at a higher valuation. One need not understand financial models, technology trends, or even the language embedded in the documents signed. Get yourself invited into deals that others are eager to fund, and lucrative returns are sure to follow.
This phenomenon—a variant of Ben Hunt’s common knowledge game—emphasizes the edge born of recognizing inflection points in groupthink. Consider the comparatively sleepy world of project financing, where private investors like pension funds seek modest but stable returns to duration-match future liabilities. Large public goods projects such as water treatment facilities and power plants require significant upfront investment and are often fraught with risk. However, with the right combination of government support and big-name banks backing the deal, private money will often compete to participate. Good luck breaking ground absent that trifecta of confidence.
Perhaps no industry has suffered from a lack of such confidence as much as the civilian nuclear energy sector. In the decades that followed the meltdown at Three Mile Island in 1979, the industry stayed on its back foot, put there by the relentless scaremongering of opportunistic Malthusians. Barely able to defend keeping perfectly operational facilities open—let alone building new ones—nuclear power producers seemed content to avoid making any headlines, good or bad. Now, the artificial intelligence revolution and its associated need for a practically endless supply of high-quality electricity have radically altered the confidence landscape:
“The owner of the shuttered Three Mile Island nuclear plant in Pennsylvania will invest $1.6 billion to revive it, agreeing to sell all the output to Microsoft Corp. as the tech titan seeks carbon-free electricity for data centers to power the artificial intelligence boom.
Constellation Energy Corp., the biggest US operator of reactors, expects Three Mile Island to go back into service in 2028, according to a statement Friday. While one of the site’s two units permanently closed almost a half-century ago after the worst US nuclear accident, Constellation is planning to reopen the other reactor, which shut in 2019 because it couldn’t compete economically. Shares of Constellation Energy jumped as much as 22%, the most on record, to an all-time high on Friday.”
Mark Nelson, noted nuclear advocate and friend of the Doomberg team, commented on the deal to us via private correspondence:
“Electricity is not, and never was, a commodity. It is a service with strict and uncompromising location- and time-based constraints. Nuclear almost perfectly matches the specific service needs of the next generation of centralized AI datacenters in a way that distributed, weather-based energy cannot match, at least not at any reasonable cost.
Getting electricity to market when and where it is needed is a savage problem. The amount of constant power required at individual hyperscale datacenters is unprecedented. Combine these two things and nuclear power becomes extremely valuable because it is both constant and carbon-free. Restarting existing plants makes perfect sense in this context.”
While enthusiasts justifiably celebrate a milestone that would have seemed unthinkable just a few months ago, when the history of the past few weeks is written, the Microsoft deal will likely be viewed as only the second most important development for civilian nuclear power. This past Monday—on the sidelines of the Climate Week summit in New York, no less—a gathering of international heads of state, leaders of numerous mega-banks, and representatives from the nuclear industry took place at the Rainbow Room in Rockefeller Center. Titled “Financing the Tripling of Nuclear,” the meeting almost certainly marks a critical inflection point that will finally give investors around the world the confidence to pour much-needed capital into new nuclear deployment at scale. Let’s explore what went down and what it means.