Meta Turns to Nuclear Power to Run AI | Bloomberg Technology 6/3/2025

Key Concepts

AI Power Demand: The increasing electricity needs of AI models, particularly for inference.
Hyperscalers: Large companies like Meta, Microsoft, and Amazon that operate massive data centers.
Data Centers: Facilities housing computer systems and associated components, used for remote storage, processing, and distribution of data.
Nuclear Energy: A low-carbon energy source being pursued by tech companies to meet green goals.
Solid State Transformers: A new technology aiming to replace traditional transformers for more efficient and scalable electricity distribution.
Bitcoin Treasury: A strategy where companies hold Bitcoin as a reserve asset.
M&A (Mergers & Acquisitions): The process of companies consolidating or acquiring other businesses.
Energy Transition: The shift from fossil fuels to renewable energy sources.
Inference: The process of using a trained AI model to make predictions or decisions on new data.
CAPEX (Capital Expenditures): Funds used by a company to acquire, upgrade, and maintain physical assets such as property, buildings, technology, and equipment.
Net New ARR (Annual Recurring Revenue): A key metric that measures the amount of new recurring revenue a company has generated in a given period, minus any lost recurring revenue.
MNAV (Bitcoin Net Asset Value): A metric that measures a company's Bitcoin net asset value.

Meta's Nuclear Energy Deal

Deal Details: Meta is purchasing 1121 megawatts of nuclear energy over 20 years from Constellation Energy. This is a larger deal than Microsoft's previous purchase from Constellation.
Motivation:
- Clean Energy Goals: Tech companies have ambitious carbon-free goals (net-zero by 2030, 2035, etc.). Nuclear energy helps them achieve these goals, which are threatened by increased power needs for AI and reliance on gas and coal.
- AI Power Needs: Meta is heavily investing in AI, with a CAPEX of over $16.5 billion this year, one of the highest percentage increases among hyperscalers. This deal secures energy for AI-driven data centers.
- Long-Term Commitment: The 20-year deal signals a long-term commitment to AI and energy security.
- Carbon Offset: The deal provides a carbon offset for Meta's other power generation methods.
- Facility Preservation: The deal helps save a nuclear facility that might have been shut down.
- Virtual Deal: Unlike Amazon, Meta's deal is virtual, meaning they are not building data centers near the nuclear plant.
Context:
- AI Adoption Curve: The deal signals that we are at the beginning of the AI adoption curve.
- Energy Bottleneck: There is massive anxiety about energy being a blocker for hyperscalers meeting demand.
- Transmission Lines: The biggest bottleneck to powering AI is the backlog in transmission lines from energy companies to data centers, sometimes two to three years.
Quote: "Meta is playing big for the AI game."
Data: Meta will spend over $16.5 billion in CAPEX this year.

Constellation Energy and Nuclear Power

Commitment: Constellation is signaling commitment to upgrading and updating capacity, potentially building new capacity.
New Construction: There are currently no big nuclear plants under construction in the U.S. The last one in Georgia was significantly delayed and over budget, scaring people away from new projects.
Financial Support: Constellation needs customers like Microsoft and Meta to help with financing to build new plants.
Permitting: Constellation has a permit for another reactor at the same site in Illinois, making it a prime location for expansion.
CEO Statement: Constellation's CEO said they are seriously considering building a new reactor.

Elon Musk's AI Startup (xAI)

Fundraising: Elon Musk is raising money for xAI through debt and equity rounds.
Data Center: xAI has a huge data center in Memphis called Colossus, aiming for a million GPUs at that site or one nearby.
Scale: The scale of xAI is massive, requiring significant investment.
Musk's Strategy: Musk is known for raising money for his private endeavors, even while facing challenges with Tesla.
Use of Funds: The funds raised are likely to be used for building out the data center project in Memphis.

Heron Energy (Drew Baglino's Startup)

Goal: To build grid-scale power solutions to accelerate an all-electric future.
Technology: Leveraging power semiconductors to directly convert DC power from solar, batteries, and data centers to AC power for the grid, without traditional transformers.
Disruption: Aiming to provide a more efficient, compact, and scalable solution compared to old-school electricity players, switchgear providers, and transformer providers.
Market Context:
- Electricity Growth: Electricity growth is poised to triple over the next couple of decades due to AI, electrification of vehicles and buildings, and manufacturing.
- Demand, Supply, and Infrastructure: The electricity sector is at an inflection point due to robust demand, abundant renewable energy supply, and aging infrastructure.
Customers: Initially targeting data centers, with letters of intent signed with data center builders and renewable energy developers.
Tesla Connection: Possible future collaboration with Tesla on the storage and service side.
Tesla Energy's Impact: Tesla Energy has significantly contributed to the growth of utility-scale storage and residential batteries.
Quote: "The goal is to build grid scale power solutions to accelerate an all electric future."
Data: In 2024, over 50 gigawatts of storage were deployed with a CAPEX of $40 billion.

Talking Tech

EV Business: An EV business is expected to turn profitable by the second half of the year.
TSMC (Taiwan Semiconductor Manufacturing): TSMC is facing traffic delays building its plant in southwest Japan but is pushing ahead with plans to expand abroad.
Microsoft Job Cuts: Microsoft is cutting hundreds more jobs in addition to the 6000 announced last month.

Market Movers

NVIDIA: Up 3.2%, adding $1 billion to market cap.
Broadcom: Reached a new record high.
Meta: Turning attention to nuclear energy with a 20-year contract with Constellation.

VC Investment in Energy

Energiize Capital: A climate solutions intersection firm that invests in megatrends like data centers, AI, energy transition, and reshoring.
Investment Focus: Looking for software solutions with customers today, not in the distant future.
Geographic Focus: Predominantly U.S., but also invests internationally.
American Energy Dominance: Seeing American energy dominance as a real theme, with big budgets and firms spending more money in utilities and CAPEX.
Nira Energy: An example of a funded company that integrates complex energy grids using AI-based software.

Bitcoin Treasury Strategy

Trump Media: Raised $2.24 billion to buy Bitcoin for its treasury.
Bitcoin Treasury Companies: Companies that acquire Bitcoin as their core focus.
Differentiation: The market differentiates between companies that add Bitcoin to their treasury for growth purposes and those that focus on Bitcoin acquisition.
Key Measures:
- Method of Acquisition: Debt vs. equity, terms of debt.
- Brand and Trust: Importance of management team.
- Yield Generation: Ability to generate yield across market cycles.
Bitcoin Maturation: Bitcoin has matured as an asset, with the introduction of Bitcoin ETFs.
MNAV Cover: A metric for evaluating Bitcoin treasury strategy companies, measuring the pace at which a company can acquire Bitcoin to justify the premium.
Decentralized Finance (DeFi): Companies are providing DeFi tools for lending, borrowing, and yield generation on Bitcoin.

Snowflake's Strategy

Crunchy Data Acquisition: Providing a world-class offering for customers right within Snowflake for transactional stores.
M&A Approach: Thoughtful acquisitions that fulfill a clear need, quickly integrated and taken to market.
Open Flow Acquisition: Will make it easy for customers to bring data from unstructured data systems.
Hiring: Hiring in key functions, including product, sales, and marketing.
AI Integration: Using AI applications within Snowflake to improve efficiency.
Growth: Company is growing exceptionally well, with 25% growth for the year and no deceleration in Q4 to Q1.

Earnings Reports

HP: Morgan Stanley expects a mixed report, especially for the server business.
CrowdStrike: Wedbush raised its target price after the report.

CrowdStrike and Cybersecurity

Recovery: CrowdStrike has recovered well from a past incident, but net new ARR is still negative.
Generative AI Impact: Generative AI is causing changes in the cybersecurity space, with concerns about data leaking to large language models.
Data Security: Data security is becoming paramount, which benefits CrowdStrike.

Inference and Power Density

Inference as Driver: Inference and reasoning are driving power demand due to power density.
Meta's Scale: Meta is serving 3 million monthly active users and needs a lot of compute to roll out generative AI.
Power Utilization: Meta is trying to utilize NVIDIA GPUs at 100% capacity, requiring significant power.
Power Bottleneck: Meta is being proactive in sourcing power to avoid it becoming a bottleneck.

Conclusion

The broadcast highlights the increasing demand for energy, particularly driven by AI, and the various strategies companies are employing to secure their energy needs and capitalize on the energy transition. These strategies include nuclear energy deals, investments in new transformer technology, and the adoption of Bitcoin as a treasury asset. The discussion also covers the competitive landscape in AI, the importance of data security, and the role of venture capital in funding innovative energy solutions.