Investors Turn to Nuclear Power Amid AI Boom
Investors are diversifying their portfolios beyond semiconductor stocks, drawn by the resurgence of interest in nuclear power and uranium. This shift reflects growing anticipation of increased electricity demand driven by the widespread adoption of generative artificial intelligence (AI), prompting a reevaluation of energy stocks.
Rising Uranium Prices:
Uranium prices have surged by approximately 70% over the past year, outpacing gains in semiconductor stocks. This trend mirrors investor optimism surrounding the potential benefits for nuclear power-related companies from the exponential growth in electricity demand fueled by the widespread use of generative AI.
Goldman Sachs Expands Presence:
Goldman Sachs is bolstering its position in the market, expanding into uranium options trading for hedge funds in addition to physical uranium. The American investment bank holds $356 million worth of uranium inventories at its British trading subsidiary as of the end of 2022.
Market Dynamics and Price Surge:
Hedge funds and investment banks are driving the surge in uranium prices, with expectations of further increases due to expanding demand growth and limited supply availability. The spot price of refined uranium reached $106 per pound in February, the highest since 2007, reflecting renewed interest in nuclear power generation.
Tech Industry's Role:
The tech industry's increasing reliance on data centers powered by generative AI has led to a reassessment of nuclear power as a stable energy source. Major tech companies, including Microsoft, are investing in nuclear power plants to ensure constant electricity supply for their data centers.
Impact on stock values:
The soaring demand for uranium has prompted a reevaluation of nuclear power companies, positioning them as AI-related stocks. Comparatively low price-to-earnings ratios (PER) of nuclear power companies, such as Vistra, suggest potential undervaluation in the current market landscape.
Uncertainties and Challenges:
Despite the renewed interest in nuclear power, uncertainties remain regarding the construction of new atomic plants and cost escalations. Challenges such as supply constraints and rising construction costs pose potential hurdles to the expansion of nuclear power generation.
