Investors are becoming bullish on energy stocks that are linked to nuclear power and the fuel required for it, which is uranium. The semiconductor sector saw good spikes in stock prices as Nvidia last week gained 15% in five trading sessions after the announcements of investments in AI infrastructure by Meta, Microsoft, and Amazon in their first quarter earnings calls.
Nuclear power and uranium stocks are the new market favorites
The semiconductors will be used in data centers, which will require tremendous amounts of power, and there is no other better source than nuclear at the moment, which is why now investors are flocking to these stocks.
Over the past year, prices of uranium have increased by 70%, which is more than chip stocks for the same period, which proves that investors are expecting to leverage the benefits of increased electricity demand.
For active purchasing of nuclear and uranium stocks, investors are focusing on the business trends of big technology groups with strong financials in the US market. Generative AI is graphic processing units (GPUs) and large-capacity servers that have high energy needs, and according to Morgan Stanley, the electric demand will increase by 318 terawatts from 2024 to 2027, which can be met with 39 large-scale nuclear reactors as it is almost equal to the needs of an entire densely populated country.
Microsoft is also buying electricity from nuclear sources to power its data centers in the Eastern US. It is also looking into small modular nuclear reactors (SMRs) and is already soliciting experts for this purpose. Experts say that big tech companies will be key players in nuclear power enhancement.
Uranium is outpacing semiconductors
Investment banks and hedge fund calculations are also fueling the price surge. Andre Liebenberg, CEO of a company operating in the uranium sector based in London called Yellow Cake, said,
“The general industry consensus remains that further increases are inevitable as expanding demand growth comes up against limited supply availability.”
Source: Nikkei.
Back in 2011, when Japan was hit by a tsunami, it caused a nuclear accident at the Fukushima nuclear plant, after which the uranium price stagnated and has not moved much, but the generative AI wave has changed the market dynamics all at once.
As of now, the prices of uranium are also rising along with semiconductor stocks, but the reason for it outpacing the semiconductor is its limited supply and the consideration of investors as an AI-linked resource.
Nuscale Power in the US also canceled its first small modular reactor project back in November because it estimated that the cost of electricity generation would increase by 50% due to higher construction costs.
Mining companies cannot increase their uranium production rapidly due to many technical and geopolitical factors, so the supply is expected to remain limited, and the investment infusion by traders is also amplifying the price surge.
