Compute is now often bounded by electrons and interconnection, not only chips. Developers and operators that control both generation and supply chains often win on cost and schedule.
Securing electricity is the critical factor for whether a data center facility can exist. For operators, energy is both an existential requirement and a strategic risk—no power, no data center. The industry is facing multiple challenges:
However, the model of relying on the grid and PPA is under pressure. Integrated energy parks, which combine generation, storage, and compute on one site, have been emerging because they can shorten interconnection timelines and cut deployment risk. However, some hyperscalers are beginning to take this model a step further by owning or co-developing generation.
Once operators decide to control their own power, the next question is which sources match 24-hour loads without constant backup. AI racks run close to a flat load profile, with peaks typically only 10-15 percent above steady draw. That makes steady baseload a planning advantage.
Gas generation has been a default option as it is quick to deploy at will (i.e., ‘dispatchable’, unlike solar or wind) and can run baseload. That is why some developers consider on site or proximate gas to accelerate energization. Nevertheless, there are some trade-offs. Gas emits CO₂ and fuel exposure adds price volatility to long run business cases. For operators with carbon free targets, gas usually needs carbon capture or very high renewable matching to meet those goals.
Increasingly, nuclear is becoming part of the data center power conversation. Nuclear provides continuous, carbon free baseload at large scale, and it does so on a small footprint compared with wind or solar of equivalent output.
Today’s nuclear build is mostly in places where Western hyperscalers aren’t scaling fastest (with the exception of the UK and Japan, and pockets of India and Korea), so the real “nuclear land‑grab” for AI in the West will likely be largely driven by restarts.
Restarts can be materially faster than new construction. Teams refurbish turbines, generators, and control systems, reload fuel, complete safety and environmental reviews, and reconnect to the grid. This approach is often faster than greenfield development because the site, grid tie, and much of the plant already exist. Recent examples include Microsoft’s 20 year deal tied to Three Mile Island Unit 1 in Pennsylvania,3Amazon’s long term deal with Talen at Susquehanna in Pennsylvania,4 and Google’s 25 year agreement with NextEra to restart the Duane Arnold plant in Iowa.5
Countries that actively allow private nuclear investment will likely gain an edge. The United States, Canada, France, the United Kingdom, Sweden, and Japan have frameworks for private participation and for advanced projects such as small modular reactors (SMRs). These markets are already attracting hyperscale commitments and partnerships. By contrast, countries where nuclear is banned by law or constitution, such as Germany, Austria, Denmark and Ireland may need to reassess if they want a fair shot at hosting the largest AI campuses.
Could colocation players follow this path? Perhaps, but the path is not straightforward. Hyperscalers have predictable demand and deep balance sheets, which supports ownership. Colocation depends on diverse tenants and thinner margins, which makes full ownership harder to justify.
More likely, the colocations will enter joint ventures with energy generation companies and shared energy campuses. In practice, that would help them secure long term rights to dedicated power without taking the whole asset onto the balance sheet.
Markets are reacting to the data center–nuclear dynamic. Investors have been buying companies that manufacture reactor equipment and supply uranium. Nuclear stocks have surged over the past two years, with Nuclear ETFs doubling in roughly 18 months.
It is becoming clear that the AI era will not wait for the grid and that a shift from purchase agreements to asset ownership marks a fundamental change in digital-infrastructure economics. If you develop, invest, or regulate in this space, reach out to KPMG’s Global Data Center Ecosystem Hub & energy teams to navigate the changing dynamic with confidence.
The US still generates more nuclear power than any other nation, but its lead is a relic of a previous era. While American nuclear construction has largely stalled for decades, China’s relentless building program, fueled by aggressive state financing, is set to leapfrog the US soon.
