Uranium mining exchange traded funds (ETFs) are having a strong October thus far. One of the reasons for the increased investor interest is the use of nuclear power by big tech.
The largest tech companies are focused on bolstering their artificial intelligence (AI) ambitions. That will require an insurmountable dose of power to run these applications. Higher demand for electricity has been the result of this need, but another alternative that big tech is looking into is nuclear power.
“Exchange-traded funds that track uranium miners and nuclear-energy stocks have skyrocketed in October, as major tech companies have tapped into nuclear power to fuel data centers as part of their AI push,” confirmed the Financial Times.
Higher Demand for Uranium Equals Rising Prices
Interest in nuclear energy has been growing in the past years as the push to reduce global emissions continues to gain momentum. As such, more countries are considering the use of nuclear energy. That’s placing higher demand for uranium and thus, the rising prices. The effect of rising prices shouldn’t affect nuclear operations in the future, such as potentially forcing consumers to seek cheaper alternatives.
“The cost of nuclear fuel is somewhere between 5% and 10% of the total cost of the reactor over its lifespan — so even if uranium prices double, the companies don’t run the risk of thrifting out nuclear power for another energy source,” said Mike Kozak, metals and mining analyst at Cantor Fitzgerald. “There’s a lot of runway before [uranium prices] become a sticking point with a nuclear-power plant.”
Meanwhile, the use of AI becoming more prevalent should support the bullish case for uranium. From an investment standpoint, AI’s growth could be the rising tide that lifts all boats, with uranium being one of the proverbial vessels.
“I think risks are in any segment of the market that has seen significant appreciation in recent years, and the fact that nuclear has been so closely tied to AI and data-center usage is something that investors should take caution with,” said Brandon Rakszawski, director of product management at VanEck. “But there is this overarching structural growth story that’s been playing out.”
Uranium Mining Opportunities
Given its connection to the growth of AI, uranium miners present a compelling opportunity. For exposure, consider using the Sprott Uranium Miners ETF (URNM ) and/or the Sprott Junior Uranium Miners ETF (URNJ ).
URNM tracks the North Shore Global Uranium Mining Index. It invests in global firms that mine, develop, and produce the metal. It also invests in firms that hold the physical metal, or royalties from it. The fund is an ideal pathway for investors to get exposure to rising prices of the element. It also provides a portfolio diversification tool that allows for uranium exposure without actually investing in the commodity itself.
For discerning investors who want even greater growth potential, small-cap companies can offer amplified moves when markets trend toward the upside. Investors could create a small-cap uranium mining portfolio of individual stocks, but an easier way is via URNJ. The fund seeks to provide investment results that correspond generally to the total return performance of the Nasdaq Sprott Junior Uranium Miners Index. That index tracks mid-, small-, and micro-cap companies in the metal’s mining business.
For more news, information, and analysis, visit the Gold/Silver/Critical Minerals Channel.
Past performance is no guarantee of future results. One cannot invest directly in an index. For the latest standardized performance and important risk disclosures regarding Sprott investment products, including each fund’s prospectus, which should be read carefully before investing, please review each product’s webpage by clicking on the corresponding ticker:
Exchange Traded Funds (ETFs): SETM, LITP, URNMURNJ, COPP, COPJ, NIKL, SGDM and SGDJ
Physical Bullion: PHYS, PSLV, CEF and SPPP
