Three phase ac drives using a dc link typically feature a significant amount of dc energy storage to maintain a stiff dc bus. This paper examines the concept of reducing the size of the dc link capacitor dramatically, to store just enough energy to provide one high frequency switching cycle of output power. The dc bus is no longer stiff and hence the classical sinusoidal pulse width modulation cannot be used. But, the stored energy modulation (SEM) concept that is used here synthesizes high quality sinusoidal waveforms even with such tiny dc link capacitors. In SEM, the switching intervals of the interconnecting switches are carefully determined nonlinear functions of various operating parameters such as reactive component sizing, switching frequency, load levels, etc. The detailed operation of the SEM modulated converter for a field-oriented controlled (FOC) four-quadrant permanent magnet synchronous machine (PMSM) electric drive application using space vector modulation (SVM) has been presented in the paper. The paper also includes circuit simulation results and preliminary design considerations of a SEM modulated drive.