It looks as if the next generation of computing and the next generation of nuclear energy could go hand in hand.
Microsoft Corp. (ticker: MSFT) is reportedly eyeing the possibility of powering artificial intelligence data centers, which will require more energy than traditional ones, with small modular reactors that can produce nuclear power on a much smaller scale than traditional plants.
That’s on top of other links the tech company has with nuclear energy, and it’s an illustration of how nuclear power is entering a new age as the world seeks to decarbonize its economies to fight climate change.
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The company earlier this year said it would buy power from a nuclear fusion startup in 2028. Also this year, Microsoft and utility Constellation Energy Corp. (CEG) said the tech giant would match part of the power needed for a data center in Virginia with nuclear energy produced by the utility. Last year, Microsoft said it would buy clean energy credits from nuclear assets in Ontario. And in 2008, Microsoft co-founder Bill Gates started up TerraPower, which works on small modular reactors like those Microsoft apparently envisions powering its AI data centers.
“The nuclear industry has faced challenges and controversies in the past, but it is starting to make a comeback as countries seek to reduce carbon emissions and meet their energy needs,” says Evan Tunis, president of Florida Healthcare Insurance and a specialist in personal finance. “With advancements in technology and safety measures, nuclear energy is becoming a more viable and sustainable option for many nations.”
Even though environmentalists are split on nuclear energy, which produces radioactive waste, Bill Gates and other billionaires remain interested in the next generation of nuclear energy.
Other investors may also be wondering how they can get on in the action. Here’s a look at three companies spanning different parts of the nuclear industry and a couple of exchange-traded funds, or ETFs, that can broaden this investing theme in your portfolio:
| Stock/ETF | YTD return as of Oct. 5 |
| Constellation Energy Corp. (CEG) | 26.4% |
| Cameco Corp. (CCJ) | 63.8% |
| NuScale Power Corp. (SMR) | -53.7% |
| Global X Uranium ETF (URA) | 28.5% |
| VanEck Uranium+Nuclear Energy ETF (NLR) | 23.4% |
Constellation Energy Corp. (CEG)
With the biggest fleet of nuclear plants in the U.S., Constellation would be an obvious choice as a source for Microsoft to turn to for its nuclear energy-matching needs.
Last month, the company announced that its 21 reactors at 12 sites ran nearly 100% of the time in June, July and August, providing carbon emission-free power to the equivalent of 15 million average American homes during the hottest summer on record.
As a utility, Constellation represents a defensive investment in investor portfolios. It’s unlikely to outperform growth stocks during times of economic expansion and stock market optimism. But when the tide turns and economic uncertainty increases, the stock could be a good cushion because homes need electricity year-round, regardless of what the economy is doing. In 2023 it’s returned 26.4% as of Oct. 5, a not-too-shabby performance.
“As the quantity and severity of these extreme weather events increase, Constellation’s clean energy centers continue to play a vital role in providing reliable and affordable carbon-free energy to American homes and businesses,” Bryan Hanson, Constellation’s chief generation officer, said in a press release accompanying the announcement. “As the summer storms and excessive heat wane, we’re shifting our focus to a comprehensive fleetwide winter preparedness campaign, to ensure that we are equally prepared for extreme cold temperatures.”
Cameco Corp. (CCJ)
This Canadian uranium producer is the world’s second-biggest miner of the radioactive element behind Kazakhstan-based Kazatomprom (OTC: NATKY). Rising uranium prices stand to benefit the company.
“Spot uranium prices are up 47% year to date amid a host of favorable supply and demand dynamics,” Rohan Reddy, director of research at Global X ETFs, wrote on the investment management firm’s website.
“Sources of price pressures run the gamut, including lower production guidance from producers like Cameco, a coup in Niger potentially affecting its output, and uranium physical funds becoming more active,” he said. “In line to benefit from these price trends are uranium mining, enrichment and nuclear component players, who all contribute to the world turning to nuclear energy as a reliable and sustainable power source.”
Natural resources investment firm Goehring & Rozencwajg Associates said in a recent note that it expects uranium prices to head back to their all-time high of $145 per pound, hit in the mid-2000s.
By the end of this year, the firm expects commercial uranium inventories to only be able to cover reactor demand by less than 18 months. Dozens of reactors are under construction worldwide, with each requiring three years of uranium fuel for its initial core loading.
“Looking to the end of the decade, global uranium markets are set to tighten to unprecedented levels,” the note said. “The cumulative deficit between 2023 and 2030 will likely exceed 250 million pounds, completely depleting all commercial stockpiles.”
Returning to Cameco, Reddy thinks the company’s shares may have room for growth.
“From a valuation standpoint, Cameco appears attractive as earnings forward estimates are more appealing than recently reported ones,” he wrote. “It might be argued that Cameco has the potential to achieve a higher market value, as it seems to be currently undervalued.”
As a mining company, Cameco is subject to uranium price movements, which can be volatile even though they are expected to continue rising over the long term. Still, the company is an established producer, making it less risky than exploration companies that aren’t yet in production.
[7 Best Carbon Capture and Decarbonization Investments]
NuScale Power Corp. (SMR)
This company that designs and markets small modular nuclear reactors is new on the block, and as a startup, it could be a risky investment.
But earlier this year the company received U.S. Nuclear Regulatory Commission certification for one of its designs, which had gotten commission approval in 2020, putting it ahead of any other small modular reactor company for either regulatory milestone. In August, the company cleared another milestone when the commission accepted its application for approval of a design with a higher power output.
The company says its pressurized water reactors can generate 77 megawatts of electricity and can be scaled up to more than 900 megawatts. The design is smaller than a traditional nuclear reactor and can be used to replace retiring coal plants and provide baseload power for wind and solar farms.
Global X Uranium ETF (URA)
To spread out the risk that can come with owning a single stock, such as startups like NuScale, investors can consider exchange-traded funds. Many of these funds package multiple companies under a single ticker symbol, providing one-stop-shop diversification.
That diversification reduces the risk of a single company’s stock price tanking, but it also means that an ETF is unlikely to outperform a single company whose stock does really well.
This ETF invests in companies involved in mining uranium and producing nuclear components. It has a 0.69% expense ratio.
In the case of NuScale, the company makes up just 0.7% of the fund’s roughly $2 billion in net assets. Cameco is its No. 1 holding, making up 22.6% of the fund as of Oct. 5.
“The core activities performed by these companies include extraction, refining, exploration and manufacturing of equipment used in the uranium and nuclear industries,” says Thomas Brock, a chartered financial analyst and expert financial reviewer for Annuity.org. “URA’s high degree of diversification and relatively low cost are the primary reasons I like this fund.”
VanEck Uranium+Nuclear Energy ETF (NLR)
This ETF invests in uranium mining companies; those that build, engineer and maintain nuclear power facilities and reactors; companies involved in the production of electricity from nuclear sources; and those that provide equipment, technology or services to the nuclear power industry.
“Nuclear is a significant clean energy source at an inflection point where governments must reconcile downward trending nuclear energy output with increasing demand for clean energy,” the fund’s website says.
This fund is slightly cheaper than URA, with an expense ratio of 0.61%. Constellation is its No. 1 holding at 7.9% of its net assets, Cameco is No. 3 with 6.4% and NuScale comes in last among its company holdings before cash positions at 0.7%.
“With the potential for growth and a lack of correlation to other industries, nuclear stocks and ETFs can help mitigate overall risk in a portfolio,” Tunis says.
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5 Best Nuclear Energy Stocks and ETFs to Buy Now originally appeared on usnews.com
Update 10/06/23: This story was previously published at an earlier date and has been updated with new information.
