Tech Diffusion and GenAI_ The Nuclear Fleet to Power GenAI

Summary of Key Points from the Conference Call Industry Overview - The focus is on the nuclear power industry in South Korea and its implications for the data center sector, particularly in relation to GenAI applications. Core Insights and Arguments 1. Nuclear Fleet Growth: South Korea's nuclear power generation is projected to increase from 180 TWh in 2023 to 231 TWh by 2036, accounting for 35% of the country's total electricity output, up from 31% in 2023 [2][6][9]. 2. Energy Policy Changes: The newly enacted Energy Dispersion Act allows companies to secure power directly from nuclear plants, facilitating co-location of data centers at these sites, which is expected to provide stable, low-carbon power [3][25]. 3. Regional Data Center Hub: South Korea is positioned to become a regional hub for data centers due to its nuclear power capacity, shorter time to power, and the geopolitical landscape limiting operations in mainland China [4][43]. 4. Beneficiaries of Growth: Potential beneficiaries include: - Korean Telcos: Expected to benefit from rising demand for AI infrastructure, with OW ratings on KT and SKT, and UW rating on LGU [4]. - KEPCO: Anticipated mid-to-long-term catalysts from tightening electricity supply and improving nuclear mix [4]. - Battery Manufacturers: Companies like LGES and Samsung SDI are expected to see growth in their Energy Storage Systems (ESS) business due to increasing demand for consistent power supply [4]. 5. Capacity Reserve: South Korea's capacity reserve is projected to reach 22-25%, providing around 30 GW of surplus power for new data centers [13]. 6. Data Center Demand: Approximately 80% of existing data center capacity is located in the greater Seoul area, which is facing grid constraints, prompting a shift to suburban areas [29][30]. 7. Government Incentives: Regional governments are offering substantial subsidies to attract data center investments, recognizing their potential for job creation and economic growth [36][38]. 8. PPA Opportunities: New regulations allow for Power Purchase Agreements (PPAs) in suburban areas, enabling direct negotiations for electricity supply, which could lower costs for data centers [33][34]. Additional Important Insights 1. Impact of Global Trends: The increasing pressure on global cloud hyperscalers to meet carbon targets is driving interest in co-locating data centers near nuclear power plants, which offer a stable and low-carbon power source [48]. 2. Comparative Advantage: South Korea has a significant advantage over Japan in nuclear generation capacity, with 26 units and 26 GW compared to Japan's 12 units and 12 GW [51]. 3. Future Demand Projections: The total addressable market for data centers in North Asia is expected to grow, with an estimated 4.6 GW of additional demand by 2030, which could be serviced from South Korea [43]. This summary encapsulates the key points discussed in the conference call, highlighting the strategic importance of South Korea's nuclear power capabilities in supporting the growth of data centers and GenAI applications in the region.