The other side of utilities

While market talk this week has once again concentrated around AI, as of Thursday, the utilities sector—not tech—had led the S&P 500 (SPX) over the past five trading days, as well as over the past month.

Also, E*TRADE from Morgan Stanley’s most recent monthly sector rotation study showed a significant push into utility stocks in September.

But the sector’s strength doesn’t appear to be a defensive shift on the part of US stock investors—at least not entirely. And it may have an AI component.

That’s because nuclear power stocks appear to have been a significant contributor to the recent utilities rally, highlighted by moves like the one in Oklo (OKLO), a Small Modular Reactor (SMR) company whose stock has doubled since early September:

The need for energy to power AI datacenters is still a pressing issue, and nuclear is expected to make a significant contribution to satisfying future demand. In that light, a company like OKLO is better thought of as a potential growth stock than a defensive one. It’s also worth noting that some of the companies operating in the nuclear space, including other SMR players like NuScale (SMR), fall into the industrials sector rather than utilities.

Morgan Stanley & Co. analysts estimate that global new nuclear capacity by 2050 will be 586.8 gigawatts (a 53% increase from last year’s base case), with potential investment in the nuclear value chain of $2.2 trillion (up from $1.5 trillion projected last year).¹

While SMRs have been in the spotlight in recent months, they aren’t the entire nuclear story. Context is important. Just as nuclear energy isn’t going to satisfy AI energy demands by itself, SMRs aren’t necessarily going to dominate the nuclear market.

Morgan Stanley & Co. analysts, for example, recently described SMRs as promising but also as “next-decade technology,” with deployment anticipated from the late 2020s to early 2030s. (Only a few operational models exist globally; the US has the largest SMR pipeline.) In their “The Nuclear Renaissance Is Here—What's Next?” report, the analysts also discuss potential opportunities in “Fourth Generation” (Gen-IV) reactors and reactors that use alternative fuels, such as thorium.

Market Mover Update: After cash gold prices closed above $4,000 for the first time in history on Wednesday, the market throttled back on Thursday, with December futures (GCZ5) falling 2.4% to $3,972.60.

Amrize (AMRZ) options volume continued to be higher-than-average on Thursday, with most of the trading still occurring in the November $60 calls (see “A material(s) issue”).

Today’s numbers include: consumer sentiment (10:30 a.m.).

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¹ MorganStanley.com. The Nuclear Renaissance Is Here—What's Next? 8/15/25.