On Sept. 20, utility Constellation Energy Corp. (ticker: CEG) said it would restart a unit at the Three Mile Island nuclear power plant in Pennsylvania, with Microsoft Corp. (MSFT) agreeing to purchase energy from the revived plant to power its data centers.
The announcement hits at three key factors to understand when investing in nuclear companies: a growing acceptance of nuclear energy, increased electricity demand from data centers and the desire to produce that electricity without fossil fuels.
Three Mile Island is synonymous with fear about nuclear reactors because of a 1979 accident that released radiation into the surrounding community. The unit where that occurred is being decommissioned, and it is separate from the one Constellation is reopening, which closed in 2019 for economic reasons.
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But fear among environmentalists about the risks appears to be giving way to acceptance because of the green benefits nuclear offers.
Electricity demand from data centers is expected to continue growing, especially given the boom in energy-gobbling artificial intelligence.
To fill that demand with baseload power that can generate electricity when wind and solar farms can’t, grid developers can turn to battery storage, which is expensive and in its infancy; natural gas, which is cleaner than coal but still a carbon-emitting fossil fuel; and nuclear reactors. Hydro power and geothermal plants are also options, but they are constrained by geography.
“The outlook for the nuclear industry has never been more promising, with a renewed global interest from both public and private sectors driving unprecedented momentum,” says James Walker, a nuclear physicist and CEO of reactor technology company Nano Nuclear Energy Inc. (NNE). “As the world confronts the urgent need to transition to clean energy, nuclear power is increasingly recognized as a vital component of the solution.”
For years after a 2011 disaster at a nuclear reactor in Japan — a far worse occurrence than Three Mile Island — governments around the world turned their back on reactors. Now, with the need for green baseload energy, nuclear power is having a renaissance.
“With the insatiable energy demands of AI, the world is returning to nuclear power,” says Blaine Townsend, director of sustainable, responsible and impact investing at Bailard. “Its low emissions and near-constant baseload of power should make it part of the solution.”
With that backdrop, let’s take a look at stocks and funds that touch on aspects of the nuclear supply chain:
— Cameco Corp. (CCJ)
— Centrus Energy Corp. (LEU)
— NuScale Power Corp. (SMR)
— VanEck Uranium and Nuclear ETF (NLR)
— Range Nuclear Renaissance Index ETF (NUKZ)
Cameco Corp. (CCJ)
This Canadian company is the world’s second-biggest miner of uranium, behind Kazakhstan-based JSC National Atomic Co. Kazatomprom (OTC: NATKY).
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.
But Cameco also has investments across the nuclear fuel cycle, including ownership interests in a nuclear technology equipment manufacturer and a laser uranium enrichment technology company.
Technological innovation is an important consideration for investors in the nuclear sector, Walker says.
“The industry is currently experiencing a wave of innovation, with advancements in reactor designs, fuel technologies and safety systems,” he says. “However, it’s important to note that while innovative technologies offer significant opportunities, they may also carry higher development risks and longer timelines before they achieve commercial viability.”
Centrus Energy Corp. (LEU)
Current large reactors use low-enriched uranium to produce electricity.
But advanced reactors and an emerging technology called small modular reactors will create a new source of demand. Advanced reactors and more than half of small modular reactor designs in development use a more concentrated form of uranium called high-assay, low-enriched uranium (HALEU), the World Nuclear Association says.
Centrus is the only company in the U.S. with a license to make HALEU, and it has been producing small quantities.
With this license and manufacturing experience, Centrus is well positioned to make the fuel for a growing number of advanced reactors, small modular reactors and micro reactors. HALEU can also be used in conventional reactors.
NuScale Power Corp. (SMR)
One of the U.S. Department of Energy’s goals is to foster a domestic or friendly nation supply chain for low-enriched uranium for current reactors and the next generation of nuclear technologies.
Part of that future will include small modular nuclear reactors like those NuScale designs and markets.
The company says its pressurized water reactors can generate 77 megawatts of electricity each 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.
NuScale has U.S. Nuclear Regulatory Commission certification for one of its designs, giving it a foothold in the emerging nuclear renaissance.
“Companies that are at the forefront of these innovations, particularly in areas like small modular reactors and advanced fuel types like HALEU, are well positioned to benefit from the growing demand for clean, reliable energy,” Walker says.
VanEck Uranium and Nuclear ETF (NLR)
A key consideration for nuclear investors is regulation, says Walker.
“These regulations can vary significantly between countries and regions, influencing the pace at which companies can develop and deploy new technologies,” he says. “Investors should be aware that while supportive government policies and streamlined licensing processes can enhance a company’s growth prospects, regulatory challenges can lead to delays, increased costs and project risks.”
Investors who want to spread out the risk with a more diversified investment than single stocks can consider exchange-traded funds, or ETFs, which trade under a single ticker symbol but contain many stocks.
This ETF invests in uranium mining companies; companies that build, engineer, and maintain nuclear power facilities and reactors; companies involved in the production of electricity from nuclear sources; and companies that provide equipment, technology or services to the nuclear power industry.
This fund has an expense ratio of 0.61%, or $61 per year for every $10,000 invested.
Range Nuclear Renaissance Index ETF (NUKZ)
Like the VanEck ETF, this fund is diversified along the nuclear supply chain, giving investors exposure to companies involved in advanced reactors, utilities, construction, services and fuel.
Both of these funds include utilities, which can give investing in the nuclear sector a defensive tinge.
Utilities are unlikely to outperform growth stocks during times of economic expansion and stock market optimism. But when the tide turns and economic uncertainty increases, utilities can act as a portfolio cushion because houses and businesses need electricity year-round, regardless of what the economy is doing.
The fund has an expense ratio of 0.85%.
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5 Best Nuclear Energy Stocks and ETFs to Buy Now originally appeared on usnews.com
Update 09/27/24: This story was previously published at an earlier date and has been updated with new information.
