Small, modular, and ready to scale.
Small modular reactors (SMRs) are a broad term referring to compact nuclear fission reactors, typically with an electrical output of less than 300 MW. The reduced size and modular construction offer numerous advantages. First, they allow for more components to be mass-produced in factories, taking advantage of economies of scale and reducing the risk of cost overruns and delays. Furthermore, by reducing the footprint of nuclear power plants, new deployment opportunities arise, for example, near industrial facilities or data centers.
It is worth noting that SMR designs are generally divided into two main groups. Innovative Generation VI reactors, such as liquid metal or molten salt reactors, promise greater performance, safety, and efficiency, but have limited experience in development and operation. On the other hand, there is the approach of improving more mature Generation III designs, such as light water reactors (LWRs) and boiling water reactors (BWRs). Key companies like Rolls-Royce SMR and Westinghouse maintain that much of the technical work to miniaturize nuclear reactors has already been done and tested, as demonstrated by the use of reactors in nuclear submarines and aircraft carriers worldwide.
The remaining question is whether small modular reactors (SMRs) can overcome social stigma, meet stringent regulatory requirements, and offer a levelized cost of energy (LCOE) or superior suitability for data centers compared to alternatives like renewable energy. However, recent support from Google and Microsoft for SMR companies reflects a general market optimism toward nuclear-powered data centers. IDTechEx's comprehensive report on small modular nuclear reactors analyzes various designs, including comparative charts, market forecasts, and an analysis of key SMR players and projects.
Fusion instead of fission?
As a more radical alternative, the idea is to power data centers with the equivalent of fission: nuclear fusion. Although fusion reactors capable of producing energy are not yet commercially available, billions of dollars have been invested in recent years in projects and startups seeking to make this technology a reality. Major investors include governments, energy companies, and data center giants. Microsoft signed a 50 MW power purchase agreement (PPA) with the fusion startup Helion in 2023, while Google signed a 200 MW PPA with Commonwealth Fusion Systems (CFS) in June 2025, with power coming from its first fusion plant, expected to be completed in the early 2030s.
Fusion energy promises many of the same advantages as SMRs: constant, reliable, and clean energy that can be deployed in diverse environments, but without the long-term radioactive waste generated by fission.
Market Outlook:
Nuclear energy, whether through the evolution of existing fission reactors or the development of fusion, represents a promising solution for providing continuous, low-carbon power to data centers. Recent years have seen a renewed wave of interest in nuclear energy, driven by key players in the AI data center industry and by factors such as energy independence and carbon reduction targets.
Even if fission SMRs or fusion reactors manage to overcome their technical and regulatory challenges, they will have to compete with the ever-improving renewable energy and energy storage technologies. In addition to dedicated reports on the SMR and fusion markets, IDTechEx's report, "Sustainability for Data Centers 2025-2035: Green Technologies, Market Forecasts, and Players," delves into the competition among various green energy sources for powering data centers, as well as other trends aimed at reducing Scope 2 and 3 emissions in this increasingly relevant industry.
