FERC Decision Sparks Sell-Off in Nuclear Stocks: What This Means for Amazon’s Power Expansion Plans and Investors in Nuclear Energy
In a surprising move just ahead of Election Day, the Federal Energy Regulatory Commission (FERC) rejected a request to expand the energy capacity for Amazon’s nearby data center from Talen Energy’s Susquehanna nuclear plant in Pennsylvania. Talen Energy (TLN) and grid operator PJM Interconnection sought to increase power supply from 300 MW to 480 MW to support the center, owned by Amazon (AMZN), but FERC’s refusal sent shockwaves through nuclear energy stocks, raising questions about the future of nuclear power projects and potential risks for investors.
By midday Monday, Amazon shares dropped 1.6%, while Talen took a sharper 4.5% hit. Nuclear stocks known for their speculative appeal fell even more. NuScale Power (SMR), an innovator in small modular reactors, dropped 4.6%, while Oklo (OK) and Nano Nuclear (NNE) suffered declines of 6% and a steep 10.1%, respectively.
Why FERC’s Decision Matters
FERC’s decision not only affects Talen but signals potential implications for other companies seeking to provide nuclear energy solutions for data centers, including Amazon’s and other tech giants’ operations. FERC cited “grid reliability and consumer cost impacts” as reasons for blocking Talen’s increased power allocation, despite the successful contracts already secured by Constellation Energy (CEG) to supply Microsoft’s data centers with nuclear power.
Constellation and Vistra (VST), larger utilities that generate billions in annual revenue from diversified energy sources, including nuclear and natural gas, also experienced mild declines. But for these more established players, the long-term implications may not be as critical as for smaller nuclear firms whose business models rely heavily on the viability of modular reactor setups near high-demand centers like data centers.
The Fallout for Small Nuclear Stocks
The FERC decision hits particularly hard for companies like NuScale, Oklo, and Nano Nuclear, who are betting on nuclear micro-reactors and small modular reactors (SMRs) to revolutionize energy supply for tech and other high-consumption industries. These companies envision a future where their compact reactors can deliver energy directly to power-hungry data centers located near their plants, effectively supporting massive demand while reducing reliance on the traditional grid.
If FERC’s decision signals a shift in policy or hesitance toward nuclear expansions for tech partnerships, this could cast a shadow on smaller nuclear ventures, especially since none of these companies have yet achieved operational revenue. Their soaring stocks in recent months — with Oklo’s stock doubling, Nano Nuclear quadrupling, and NuScale’s surging sixfold over the past year — have attracted keen investors, but FERC’s stance introduces a sudden jolt of uncertainty.
A Case for Nuclear in Big Tech
The broader story revolves around big tech companies’ growing interest in using nuclear power to run their operations. Microsoft’s partnership with Constellation, announced in October, aims to supply nuclear-generated power for its AI data centers, backed by plans to revive the Three Mile Island Unit 1 nuclear reactor. Such partnerships not only showcase the renewed faith in nuclear as a clean and reliable energy source but also highlight the strategic alignment between tech companies and energy innovators.
While Constellation’s deal with Microsoft remains unaffected, FERC’s decision to limit Talen’s supply expansion for Amazon underscores a new challenge. Industry watchers suggest Talen will appeal FERC’s ruling, and some expect adjustments may be made in response to the appeal. FERC’s ruling doesn’t completely prevent Amazon’s data centers from accessing power from Susquehanna; it merely caps the supply at the existing 300 MW limit.
Is the Risk Worth the Reward for Investors?
For companies like NuScale, Oklo, and Nano Nuclear, FERC’s ruling appears to increase regulatory risks for their budding reactor models. While Vistra and Constellation, backed by significant capital and diversified power sources, can absorb short-term policy fluctuations, emerging nuclear innovators must navigate a landscape where policy uncertainty could be particularly challenging.
Investors may take FERC’s decision as a prompt to reassess their positions in speculative nuclear stocks, especially after recent rallies. The potential for future regulatory hurdles may suggest increased caution, while also underscoring the importance of diversified growth strategies for utilities. For now, the nuclear energy sector continues to evolve, but investors will be watching closely to see how regulatory trends impact both established players and emerging pioneers in the industry.
