Q > 1: The starting gun for the race to commercialize fusion

Many people assume that the race to fusion energy ends when a company demonstrates breakeven (Q>1). In reality, that moment is akin to the Wright brothers’ first flight at Kitty Hawk: a proof that the physics works, and the starting gun for a much bigger race to build an industry.

Commonwealth Fusion Systems (CFS), a company I co-founded in 2015, has recently announced an $863M extension to its previously record-setting $1.8B Series B raise of venture capital. This is a sizable fraction of the nearly $10B that has now been invested in private fusion companies. 

While this level of investment may seem like a lot for a new technology, it is just a drop in the bucket of what will ultimately be needed to support the growth of a new and profitable commercial industry. As with aviation, fusion will be built by more than just the first firms to fly.

Successful companies, like CFS, will need to tap into new investors beyond venture capital to finance their own growth and that of their suppliers if they are to become mature enterprises that profitably field fusion power plants. For investors, this financial reality presents a significant opportunity to make outsized returns in a burgeoning industry. 

Investors will find three types of companies in fusion, each with a distinct risk-reward profile. These can be easily understood in comparison to the commercial aviation value chain:

1. Fusion “primaries”: the would-be Boeings and Airbuses, designing and building the plants themselves.
2. Industrial incumbents: today’s large equipment and infrastructure players, selling concrete, steel, power conversion, and controls into fusion just as they do into other power plants.
3. Fusion specialists: the emerging “engines and avionics” of the sector, developing critical, cross-cutting technologies like magnets, lasers, fuel processing, materials, and diagnostics.

Before looking more closely at these investment categories, it’s worth asking how close we are to fusion’s Kitty Hawk moment, and why this time really is different from the last 70 years.

Why the Kitty Hawk moment for fusion is near

Fusion’s Kitty Hawk moment will be the demonstration of Q>1. Q is the plasma fusion gain defined by the ratio of fusion power output to the power supplied to the plasma. Achieving Q>1 will be the moment that the majority of the world understands that terrestrial generation of energy from fusion is possible. This is exactly analogous to the first flight of the Wright Flyer at Kitty Hawk: at that moment, the world knew that heavier-than-air flight was technologically feasible. 

But how close are we really to this Kitty Hawk moment? And what will it look like? For the last few decades, fusion was supported by government programs managed by decreasingly competent bureaucrats and legislators that were too risk-averse to drive the transition from laboratory experimentation to commercialization. Fusion was effectively stuck in a government-funded big-science program that was not focused on energy generation and industrialization. The resulting stagnation was the root cause behind the adage that “commercial fusion is 30 years away and always will be.” 

So, when I talk about Q>1, I mean a commercially relevant demonstration: net energy in a system that has a near-term, credible path to high repetition rate, high duty cycle, and competitive cost of electricity. This is quite different from the landmark physics result of Q>1 achieved in 2022 at the National Ignition Facility (NIF) at Lawrence Livermore National Laboratory. NIF is a single-shot, stockpile stewardship and basic-science-focused government research facility with extremely inefficient lasers.

What has finally broken the logjam to reach a true “Kitty Hawk” moment in fusion has been the injection of private risk capital at scale. Driven by tailwinds of a growing venture capital community interested in investing in deep tech and clean energy, there has been a Cambrian-like explosion of new fusion companies from 2015-2025. These companies are monomaniacally focused on driving their concepts for making fusion power plants a commercial reality. They retire critical technological risks early and focus on creating products that have a chance of competing in the marketplace. Fusion is no longer 30 years away. It will likely arrive within a decade. 

As with the early aviation industry, there will be a wide distribution of outcomes for early fusion investors: from the modest profits of the Wright brothers, to the wild commercial success of Glenn Curtiss, to the fraudulent dealings of Armand Deperdussin. While there were many reasons for the aviation investment failures, the successes had a consistent picture of a sound technical footing, a strong business model, and solid leadership. Good investments in fusion will have similar fundamentals.

The private fusion landscape

Just as early aviation quickly sorted into airframe builders, infrastructure providers, and specialized suppliers, the private fusion landscape is now coalescing into a few recognizable groups. For investors, three categories matter most: fusion “primaries”, industrial incumbents, and emerging fusion supply chain specialists.

Fusion primaries

The fusion primaries are, for the most part, acting like the Boeing or Airbus of the fusion energy industry. They have expertise in the fusion-specialized physics and engineering that are needed to build fusion plants, but they are not fully vertically integrated. These companies rely on a diverse supply chain of industrial partners. 

To date, the fusion primaries have depended on venture capital investments to pursue their goals. They’ve pursued a wide variety of fusion concepts, with each company occupying a different niche in the space of possible fusion devices. Many are pushing forward critical, fusion-enabling innovations like superconducting magnets and high-powered lasers. The major focus for the fusion primaries is to demonstrate Q>1 in a machine they build that is representative of a commercial fusion power plant. This was the approach that I pioneered with my co-founders at CFS and has now become the industry standard.

Over the past five years, entry into this space has become relatively easy, as the demand for investment opportunities in fusion skyrocketed. There have been over 30 fusion companies that have each raised over $10M. At this level, the companies are able to execute small-scale lab R&D. At least 14 fusion companies have raised over $100M. At this level, major R&D projects can be executed and small-scale fusion prototypes, mostly falling short of Q>1, can be built and operated. Only 2 have raised more than $1B: CFS and TAE Technologies. TAE has used its funds to build machines with incremental performance improvements for over 25 years, falling short of net energy and Q>1 due to the large physics challenges they need to overcome. The majority of CFS funds have gone towards building SPARC, a machine designed to reach Q=11 and slated for first plasma and Q>1 before 2030.

The investors in the fusion primaries are now the ones enabling the commercial fusion race to be run. Without them, fusion would perpetually remain 30 years away. In doing so, investors are making some of the riskiest bets in fusion with the potential for massive, outsized returns. Most of the fusion primaries will fail. Some due to poor leadership and execution. But most due to picking a technical pathway that does not win. 

For investors, a fusion primary is the most ambitious bet: it means accepting high execution risk in exchange for the chance to partake in the profits from the very foundation of a new industry. This risk profile makes fusion primaries suitable for a subset of venture capitalists, high net worth individuals, strategics, pension funds, and endowments. Pooling capital and investing across fusion primaries, as suggested by MIT Professor Andrew Lo and implemented by Lowercarbon Capital, reduces this risk to a bet on fusion rather than a bet on any single company or concept.

Industrial incumbents

Industrial incumbents are an important part of the fusion ecosystem due to their support of the fusion primaries in building both their proof-of-concept machines as well as scaling up the fusion industry. A fusion power plant is mostly concrete, steel, pipes, power electronics, thermal-to-electric conversion, and control systems – all things that are very familiar to large industrial suppliers. Many of these products require little to no modification before being sold to fusion primaries. 

For investors, industrial incumbents are an opportunity for getting into the fusion race while hedging against uncertain timelines and scale ups of the industry. Many of the industrial players in these supplier areas are already working on providing private fusion companies with services and equipment in their present-day activities. Such efforts help established companies gain initial exposure to the fusion industry, understand particular needs of fusion, and establish what may grow into very large business segments as fusion commercialization scales.

There is safety in investing in this area as there are markets outside of fusion to support these players in the case that a commercial fusion ramp up is slow. Business in adjacent sectors can support these companies as they learn alongside the up-and-coming fusion majors. 

Investors and entrepreneurs are already forming new ventures to support this part of the fusion ecosystem. Altrusion aims to be the dominant supplier of equipment to fusion majors. Pine Island is one of the first private equity investment vehicles set up to invest primarily in industrial opportunities that support fusion along with other industries. Investors who want to profit from the rise of the fusion industry but are looking for a lower risk profile than fusion primaries should include industrial incumbents in their portfolio. 

Fusion specialists

In addition to the standard industrial equipment, new technologies specialized for fusion energy will need to be developed and commercialized. The fusion primaries have initiated this development to a degree by building up and vertically integrating capabilities in existential technologies such as superconducting magnets and high-power lasers needed for their technology pathways. But additional technologies will be required. 

A number of companies have already formed that are focused on developing technologies that can cut across most, if not all, of the concepts being pursued by the primaries. Among others, these include: Marathon Fusion, working on fusion gas processing systems; Hexium, working on isotope supply; Kyoto Fusioneering, working on thermal management, isotope processing, and plasma heating systems; NextStep Fusion, working on fusion simulation and control software; and Woodruff Scientific, working on general fusion components and services.

There are many opportunities for developing new technologies and companies with a focus on supporting fusion. Two of the major enablers, superconductors and lasers, have promising adjacent market applications outside of fusion. Production of the high-performance superconductors used by today’s fusion companies will need to scale from small labs to the level of modern battery gigafactories to support a magnetic fusion industry. By driving down the cost curves of superconductors, fusion will open up opportunities for its use in power transmission, motors and generators, magnetic resonance imaging (MRI), and other industries. 

For laser inertial fusion, a whole new class of high-power, high-efficiency, low-cost lasers will be developed and scaled to commercial production. Some of these lasers may find use in industrial processing and defense applications.

Other necessary technologies are much more specialized to fusion. Fusion power plants will need to process light gases on an unprecedented scale. Fusion fuel is typically made of heavy isotopes of hydrogen that get mixed with the fusion byproduct of helium as it is produced in the core as well as other trace gases in the system. This mixture must be pumped out at great quantities and the fuel gases must be separated from the byproducts to a high purity. Many inertial fusion concepts require this fuel to be injected in precisely-made, small-scale targets at a high repetition rate. Doing so will require new industrial techniques to mass produce the targets inexpensively.

Fusion power plants will also need very specialized materials. Fusion, as with fission energy, produces high-energy neutrons that damage the components surrounding the fusion plasma. This degrades the performance of the components over time, requiring eventual replacement. In fact, the maintenance needed due to the neutron damage will be one of, if not the primary, determinant of whether fusion is an economically viable source of energy. Improving materials to survive for long lifetimes under fusion neutron bombardment is a critical area of development. Whole new supply chains of specialty alloys, salts, and refractory metals will need to be ramped up. Maintenance will also require robotic systems, which will be enabled by advances in autonomy and robotics.

Beyond these technologies, there is a span of specialized instrumentation, control, and simulation needed for fusion. These areas have been largely the domain of academic and government research labs. However, they are slowly growing out into the private sector. Some are supported by companies that specialize in scientific equipment, some by incumbent software providers, and some by new companies spinning up to specifically support fusion.

The fusion specialists have a distinct trade-off for investors. They allow investors to bet on fusion as an industry by picking companies focused on solving relatively focused technological challenges rather than tackling the complexities of any of the fusion primaries. On the other hand, fusion specialists without opportunities in other markets are dependent on the timing and maturation rate of the fusion industry to determine their own commercial success.

Conclusions

A demonstration of Q>1 is fusion’s Kitty Hawk moment. It is the starting gun for an exciting race to commercialize what may be one of the most important technologies in the history of humanity. Just as the Wright brothers' first flight did not create Boeing, airports, or global airlines overnight, Q>1 will not magically produce a mature fusion industry.

Investors can therefore choose when and how to get into the fusion race accounting for the risk-reward postures they are willing to adopt. Fusion primaries are the high-risk, high-upside bets on specific “airframes” and operating regimes. Industrial incumbents are the runway and ground-infrastructure providers, earning solid returns from familiar equipment that happens to serve fusion as it grows. Fusion specialists are the engines, fuel systems, and avionics: more diversified than any single reactor design, but still tightly coupled to the pace and shape of fusion deployment.

The earlier investments are made with respect to Q>1 by a commercial company, the higher the potential return. Many investors remain on the sidelines, watchful as to the best time to bring fusion into their portfolios. However, some visionary private equity managers have already decided to place bets on the fusion race, recognizing the potential for outsized returns. The decision you must make is when you will make your bet on fusion energy: before, or after that Kitty Hawk moment.

Disclosure: I am a co-founder of Commonwealth Fusion Systems and advise companies and investors in the fusion ecosystem. While I do my best to write objectively, these affiliations may inform my perspective in this article. The views expressed here are my own and do not represent the views of these organizations. Nothing in this article should be construed as investment advice.