As the artificial intelligence economy gains steam, experts expect the energy-hungry technology to increase power needs.
Natural gas will be one way to power that expansion, as it is able to quickly provide electricity on demand as well as deliver baseload power, or the minimum amount of power a grid needs to keep the lights on.
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Nuclear energy is another source of power that can keep homes and businesses humming along when renewables can’t because the sun isn’t shining or the wind isn’t blowing.
For years, electricity demand in the U.S. was relatively stable, but that is expected to change as data centers need more power for complex artificial intelligence computation. Microsoft Corp. (ticker: MSFT), Alphabet Inc.’s (GOOG, GOOGL) Google and Amazon.com Inc. (AMZN) want nuclear power to run data centers.
“The demand for energy has the potential to grow significantly over the next few years due to the demand for computing power from the hyperscalers who have invested a large amount of capital into developing artificial intelligence,” says Justin Zacks, vice president of North America strategy with online trading platform Moomoo Technologies Inc.
“Traditional sources of energy such as gas and oil as well as renewables like wind and solar may not be able to meet such high demand on their own,” he continues.
The environmental lobby has warmed to the idea of nuclear energy in recent years because of its ability to deliver large amounts of electricity without spewing planet-warming gases into the air.
Governments have also done an about-face since shunning the technology after a reactor disaster in Japan in 2011.
“Companies with an expertise in nuclear energy could make solid investments if big tech is willing ramp its spending on electricity,” Zacks says. “Investors should be aware that some of these stocks have run up in anticipation ahead of the business cycle and may be volatile.”
With that in mind, here is a look at five stocks and funds investors can use to play the nuclear renaissance:
— Cameco Corp. (CCJ)
— Centrus Energy Corp. (LEU)
— NuScale Power Corp. (SMR)
— VanEck Uranium and Nuclear ETF (NLR)
— Range Nuclear Renaissance ETF (NUKZ)
Cameco Corp. (CCJ)
Uranium must be mined. While many small mining companies have been ramping up uranium production and exploration, they can be quite risky, although their upside can be quite substantial.
In contrast, Cameco is the world’s second-biggest miner of uranium, which means the company is less risky than exploration companies that aren’t yet in production.
Cameco has investments across the nuclear fuel cycle, including ownership interests in a nuclear technology equipment manufacturer and a laser uranium enrichment technology company.
Like other mining companies, Cameco is subject to price movements of the commodity it produces, which can be volatile.
Investors interested in the uranium mining sector, but who want to spread out the risk, can consider the Sprott Uranium Miners ETF (URNM) for bigger miners and Sprott Junior Uranium Miners ETF (URNJ) for smaller players.
“The uranium market is relatively calm at present with Kazatomprom, the world’s largest uranium miner, expected to increase production in 2025, but of course this could change, and any supply chain issues would see prices spike,” says Vince Stanzione, CEO at First Information, a publisher of educational materials related to financial spread betting and derivatives trading.
For exposure to uranium itself, Stanzione likes the Sprott Physical Uranium Trust (OTC: SRUUF).
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Centrus Energy Corp. (LEU)
Current large reactors use low-enriched uranium to produce electricity. Advanced reactors and more than half of designs for an emerging technology called small modular reactors in development use a more concentrated form of uranium called high-assay, low-enriched uranium (HALEU), according to the World Nuclear Association.
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.
VanEck Uranium and Nuclear ETF (NLR)
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 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. NUKZ has an expense ratio of 0.85%.
Both of these funds include utilities, which can give them 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 economic conditions.
As the nuclear renaissance gains steam, more utilities may expand their nuclear footprints.
On Sept. 20, utility Constellation Energy Corp. (CEG) said it would restart a unit at the Three Mile Island nuclear power plant in Pennsylvania, with Microsoft agreeing to purchase energy from the revived plant to power its data centers.
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5 Best Nuclear Energy Stocks and ETFs to Buy Now originally appeared on usnews.com
Update 12/30/24: This story was previously published at an earlier date and has been updated with new information.
