Amazon will fund development of a 960-megawatt small modular reactor (SMR) power plant to be built in the U.S. state of Indiana and will be the first buyer of the electricity it produces. The move is aimed at securing a stable power source through nuclear generation as power demand from artificial intelligence (AI) data centres surges.

TechCrunch reported on Oct. 19 local time that the project will be pursued at the site of a closed coal-fired power plant south of Terre Haute, Indiana. American Electric Power (AEP) will operate the plant, and reactor developer X-energy will supply the reactors.

The plant is set to install 12 of X-energy's Xe-100 small reactors. Total capacity will be 960 MW, making it the second project under a commercial agreement between Amazon and X-energy. It is three times larger than the first deal unveiled two years ago.

Amazon will secure the right of first purchase for the electricity produced by the plant, which is also set to be supplied to its own data centres. The plant will also connect to the public power grid to supply electricity. The structure is designed to meet data centre power demand while also contributing to local power supply.

The agreement extends Amazon's strategy of expanding nuclear power investment. Amazon led X-energy's $700 million Series C-1 investment round in October 2024. The two companies also announced plans to build 5 gigawatts of new nuclear generation capacity in the United States by 2039. With AI services spreading and data centre power consumption rising, the move aims to use nuclear power as a long-term means of procuring electricity.

Whether the Indiana project is realised depends on how smoothly X-energy's first commercial nuclear power project proceeds. X-energy is pursuing its first plant at Seadrift, a Dow Chemical factory site southeast of Houston, Texas, but has yet to break ground. Four Xe-100 reactors are to be installed there to supply heat and electricity to the chemical plant.

X-energy said the construction permit for the Seadrift project is in the final stage of review by the U.S. Nuclear Regulatory Commission (NRC). The site has also recently become the subject of a lawsuit filed by the state of Texas. Texas claims the plant has repeatedly failed to comply with regulations and permits related to water quality and solid waste. If such regulatory reviews and on-site risks are not resolved, it could also affect the schedules of subsequent projects.

The agreement is also a test case for whether small modular reactors can take hold in the commercial power market. SMR developers such as X-energy expect that downsizing and standardising reactors to build a mass-production system will allow them to manage construction costs and schedules more efficiently than existing large nuclear plants. Large technology companies, including Amazon, are also focusing on SMRs as an alternative to support data centre power demand.

It is unclear whether cost reductions will appear in the short term. Experts see it could take about 10 years for the advantages of mass production to become visible in practice. For the SMR industry to grow in earnest, it must address the task of lowering construction costs and meeting schedules while also satisfying reactor safety and regulatory requirements.

The market also reacted to news of the deal. X-energy listed on Nasdaq in April at $23 per share, and its shares rose 27 percent on the first trading day. Since then, the stock has fallen by about two-thirds from its post-listing high. After the contract news with Amazon, it rose about 10 percent in premarket trading, but by the time of writing the gains had narrowed and it was moving at a decline of less than 2 percent.

The project is also drawing attention for converting a closed coal power plant site into a nuclear site and linking the electricity produced to both the public grid and data centre demand. Key variables going forward are whether X-energy can proceed without setbacks on permitting and groundbreaking for its first commercial plant, and whether the large-scale nuclear power Amazon seeks to secure can translate into actual supply to data centres.