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Amazon.com Inc (Nasdaq: AMZN) was in focus this morning after its cloud computing subsidiary Amazon Web Services (AWS) announced plans to invest over $500 million in nuclear power.

This comes amid an increasing need for energy as it continues to expand its footprint in generative artificial intelligence.

On Wednesday, AWS signed a deal with Dominion Energy Inc (NYSE: D) to potentially develop a small modular reactor (SMR) near the latter’s nuclear power station in North Anna.

The announcement is in line with the broader commitment of AWS to environmentally friendly operations as small modular nuclear reactors are typically free of carbon emissions.

Amazon stock is currently up some 30% versus the start of 2024.  

Amazon sees nuclear as a great opportunity

Amazon is not alone in turning to nuclear power to meet the ever-rising energy demands of its data centers.

Earlier this month, its big tech peers Google and Microsoft made similar announcements as well.

Matthew Garman – the chief executive of Amazon Web Services dubbed nuclear “a great opportunity” in a statement today as solar and wind projects will not be able to fully satisfy the AI-related power demand in the future.

“The technology is advancing to a place with SMRs where there’s going to be a new technology that’s going to be safe and that’s going to be easy to manufacture in a much smaller form,” he added.

The news arrives a week before AMZN is scheduled to report its financial results for the third quarter.

The consensus is for it to earn $1.14 a share versus 85 cents per share a year ago.

Is AI a good enough reason to buy Amazon stock?

Dominion Energy forecasts artificial intelligence to fuel a massive 85% increase in power demand over the next fifteen years.

SMRs, it’s convinced, will be central to making its home state, Virginia, a “leading nuclear innovation hub”.

Also today, Amazon inked an agreement with Energy Northwest to develop, license, and build four new small modular nuclear reactors in Washington.

Note that artificial intelligence is being touted as a major long-term tailwind for Amazon stock, with Jefferies even calling it the best AI story out there.

In a recent interview with CNBC, the investment firm’s analyst Brent Thill said:

When you have 50% market share in cloud, you have a huge advantage in AI. 

So, it’s going to take investments, you have seen it in CAPEX, you have seen it in their spend, but this will pay off.

Brent Thill currently rates Amazon stock at “overweight” and sees an upside in it to $225 indicating potential for a more than 20% gain from here.

Our market analyst Ritesh A. is also somewhat bullish on AMZN but recommends waiting for a close above $190 for two straight days before investing in it.

Shares of the multinational based out of Seattle, however, remain unattractive for income investors as they don’t currently pay a dividend.

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