Uranium ETFs Soar as Tech Giants Bet on Nuclear Power
The Quest for Carbon-Free Electricity
This month, exchange-traded funds (ETFs) tracking uranium miners and nuclear-energy stocks have seen a remarkable surge, driven by tech giants’ ambitious bets on nuclear power. The VanEck Uranium and Nuclear ETF (NLR) has advanced 13.2%, while the Global X Uranium ETF (URA) is up 14.5%, making them the top performers in October.
Tech Giants Go Nuclear
Amazon, Alphabet, and Microsoft are among the tech companies that have made significant investments in nuclear power to fuel their data centers, which are critical for artificial intelligence applications. These companies are seeking reliable, carbon-free electricity sources to meet the surging power demand.
Nuclear Power: A Cleaner, More Efficient Option
Nuclear power has gained traction as a cleaner and more efficient energy source, with a higher capacity ratio compared to intermittent renewables like wind and solar power. The growing electricity demand from AI-related data centers, combined with the global push for net-zero carbon emissions, has brought nuclear power back into market focus.
Uranium Prices Lag Behind ETF Performance
While uranium prices have risen modestly this month, they have tempered this year after surging to $106.40 in early February. For the year, the metal is off 8%, compared with a nearly 32% advance for the VanEck Uranium and Nuclear ETF and an 18% increase for the Global X Uranium ETF.
Expert Insights: Uranium Prices and Nuclear-Power Industry
Mike Kozak, metals and mining analyst at Cantor Fitzgerald, notes that uranium prices have a limited impact on the nuclear-power industry, as the cost of uranium is only a small portion of the total cost of operating a nuclear-power facility. He believes uranium prices are at a support level and could surpass the 2024 high of around $107.
Divergence Between Uranium Prices and Nuclear-Energy ETFs
The divergence between uranium prices and nuclear-energy ETFs suggests that investors should not just focus on uranium prices when making investment decisions. Brandon Rakszawski, director of product management at VanEck, notes that nuclear-power-related ETFs may provide a more comprehensive exposure to the entire nuclear-power ecosystem, while reducing exposure to high-beta, high-cyclical uranium-related equities.
Investment Opportunities
Investors looking to tap into the potential uranium rally can consider funds like the Sprott Uranium Miners ETF (URNM), which provides pure-play exposure to uranium miners and physical uranium. The Sprott Physical Uranium Trust (SRUUF) is another option, although it has fallen 6% this year.
Caution and Opportunities
While risks are present in any segment of the market that has seen significant appreciation, there is an overarching structural growth story playing out in the nuclear-power sector. Investors should exercise caution, but also consider the opportunities presented by this emerging trend.
Top- and Bottom-Performing ETFs
Here’s a look at the top- and bottom-performing ETFs over the past week, according to FactSet data:
Top Performers
- YieldMax COIN Option Income Strategy ETF (CONY): 19.1%
- VanEck Bitcoin ETF (HODL): 13.7%
- iShares Bitcoin Trust ETF (IBIT): 13.6%
- Grayscale Bitcoin Mini Trust (BTC): 13.6%
- Fidelity Wise Origin Bitcoin Fund (FBTC): 13.6%
Bottom Performers
- United States Natural Gas Fund LP (UNG): -11.2%
- Invesco China Technology ETF (CQQQ): -8.2%
- United States Oil Fund LP (USO): -6.9%
- KraneShares CSI China Internet ETF (KWEB): -6.6%
- YieldMax TSLA Option Income Strategy ETF (TSLY): -6.5%
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