Small modular reactors (SMRs) are increasingly being viewed as a potential power solution for the rapid growth of artificial intelligence infrastructure and hyperscale data centers, according to a new report from Bernstein. The surge in data center construction is placing significant pressure on electricity grids, as these facilities require constant, high-density power supply throughout the year.
SMRs could help address this challenge thanks to their compact design, modular construction and ability to deliver continuous, carbon-free baseload electricity. Bernstein noted that several commercial agreements have already been signed between SMR developers and hyperscale technology companies to accelerate project development.
After years of being discussed largely as conceptual designs, SMRs are now moving toward real-world deployment. Multiple reactor designs are progressing through regulatory licensing processes, advancing into construction phases and beginning to demonstrate scalable manufacturing capabilities. Collaboration between regulators, national laboratories and private-sector developers has intensified as clearer technology and regulatory pathways emerge.
Policy changes have also helped speed up nuclear development. Since 2025, the United States has shortened regulatory approval timelines from more than three to five years to roughly 12 to 18 months. In addition, the Department of Energy’s Reactor Pilot Program offers an alternative fast-track pathway for projects located on federal sites, along with cost-sharing support and access to critical fuel supply. These initiatives are helping create a more favorable environment for SMR deployment.
Cost competitiveness remains a key point of debate. Early SMR projects have faced higher-than-expected capital costs due to inflation, labor shortages and supply chain constraints, in some cases significantly exceeding initial projections. However, Bernstein argues that as production scales up, learning-curve efficiencies and mass manufacturing could drive costs lower, eventually bringing SMRs closer to cost parity with traditional large nuclear reactors.
Government incentives and improved financing conditions will likely play a crucial role in enabling broader deployment and improving project returns. Bernstein estimates that at scale, SMR technology could achieve cost reductions of up to 70%, making it competitive with major energy sources currently in use.
The long-term outlook for the SMR market appears strong. Based on projects already approved or under construction, Bernstein expects global SMR capacity to grow from about 280 megawatts in 2025 to roughly 4.2 gigawatts by 2035, representing a compound annual growth rate of about 31%. Although this would still represent only around 1% of today’s roughly 377 gigawatts of global nuclear capacity, the potential upside is considerable as more reactor designs reach the market and energy demand from data centers continues to rise.