Whalesbook
L&T Bets on Nuclear Boom Driven by AI & Data Centers
Larsen & Toubro (L&T) is set for substantial growth in the nuclear energy sector, projecting its nuclear business revenue to increase by three to three-and-a-half times within five years. This ambitious target is driven by two main strategies: strengthening India's domestic nuclear capacity and actively pursuing international markets for manufacturing and project execution. The growing global need for stable, round-the-clock clean energy, particularly from power-hungry sectors like artificial intelligence (AI) and data centers, is fueling renewed interest in nuclear power. L&T's existing infrastructure and manufacturing expertise, especially at its Hazira facility, provide a strong foundation for this expansion with minimal new capital needed. The company is assessing global opportunities as approximately 32 countries plan significant scaling up of their nuclear power infrastructure.
Global Manufacturing Hub for Nuclear Parts
L&T's strategy extends beyond domestic projects, aiming to become a key equipment manufacturer for export. The company sees strong international demand for components like reactors, steam generators, and pressurizers, which it plans to produce in India and supply worldwide. Discussions are underway with global technology providers for both large-scale reactors and small modular reactors (SMRs), though these partnerships await project financial approvals. L&T has also received US Department of Energy 810 authorization, opening potential entry into the US market through collaborations. This positions L&T alongside established global nuclear EPC players like General Electric, Alstom, and Mitsubishi Heavy Industries. Its integrated steel plant and heavy forging unit further boost its capacity to produce critical components.
EPC Focus and India's Nuclear Goals
L&T has clarified its market approach: it will exclusively focus on engineering, procurement, and construction (EPC), manufacturing, and project management contracts, and will not own or operate nuclear power plants. This strategy aligns with India's goal to increase its nuclear capacity from about 8.8 GW to 100 GW by 2047. The recent passage of the SHANTI Bill (Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India) in late 2025 further opens the sector to private participation, benefiting companies like L&T. L&T has a long history in India's nuclear program, supporting technology development, manufacturing, and localization since its inception, and contributing to all 22 operational reactors in the country.
AI and Data Centers Drive Nuclear Demand
The rapid growth of AI and the expansion of data centers are major catalysts for the nuclear energy resurgence. These industries demand immense, stable, and continuous power – a need nuclear energy is uniquely suited to meet, unlike intermittent renewables. Major cloud providers are increasingly prioritizing reliable clean energy sources, driving new contracts for nuclear capacity. Goldman Sachs Research projects that data center electricity demand could more than double by 2030, requiring substantial new nuclear capacity. Small Modular Reactors (SMRs) are also gaining importance, with L&T actively discussing collaborations for both large reactors and these advanced units to power emerging demand centers like data centers.
Challenges and Risks Ahead
Despite strong growth projections, L&T's nuclear expansion faces challenges. Cost competitiveness is crucial, especially as nuclear projects face scrutiny over their economics without guaranteed large order volumes. Industry players are seeking government support, such as lower taxation and green energy classification, to make nuclear power more viable. The speed of project execution is another key factor in nuclear expansion. While L&T's Hazira facility is ready for scale-up, entering international markets might be slower initially as countries prioritize existing supply chains. L&T's EPC-only model means it won't benefit from plant ownership revenue but will rely solely on project execution and manufacturing. The stock currently trades at a P/E ratio of approximately 28.71-37.2, reflecting its growth valuation. Analysts maintain a 'Strong Buy' consensus with an average price target of ₹4,680.83, suggesting over 20% upside potential. The stock has gained 12.6% over the past two weeks, closing at ₹3,959.90.