Uranium prices have been stuck even as nuclear-energy ETFs have surged. - MARKETWATCH ILLUSTRATION/ISTOCKPHOTO
Hello! This is MarketWatch reporter Isabel Wang, bringing you this week’s ETF Wrap. In this edition, we look at uranium and nuclear-energy ETFs, which have soared this month as technology giants are seeking new sources of carbon-free electricity to meet the surging power demand of data centers that train and run artificial-intelligence applications.
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.
The VanEck Uranium and Nuclear ETF NLR has advanced 15.7% so far in October, on track to score it best month since April 2009. The Global X Uranium ETF URA is up around 17% in the same period, with the $4 billion fund on pace to log its best month in over three years, according to FactSet data.
Amazon.com AMZN, Alphabet Inc. GOOGL GOOG and Microsoft Corp. MSFT are among the tech giants that have made ambitious nuclear-power bets lately. Amazon on Wednesday signed a deal with Dominion Energy Inc. D to develop a small modular nuclear reactor. The announcement came just two days after Google said it’s pursuing a similar path by purchasing nuclear energy from startup Kairos Power.
Just last month, Microsoft also signed a 20-year power-purchase agreement with Constellation Energy Corp. CEG to revive a defunct reactor at the Three Mile Island nuclear plant in Pennsylvania.
Nuclear power — which had taken a back seat since the 2011 Fukushima disaster in Japan — has returned to the forefront in recent years as a “cleaner” and more efficient energy source with a higher capacity ratio compared to “intermittent” renewables such as wind and solar power, said Brandon Rakszawski, director of product management at VanEck.
This year, the growing electricity demand from AI-related data centers, combined with the global push for net-zero carbon emissions, have brought nuclear power back into market focus, he added.
But what about uranium?
While nuclear-energy ETFs are seeing a heyday, uranium — the heavy metal widely used for nuclear-power generation, has lost some of its luster this month. Uranium’s spot price has risen a modest 2.7% in October to trade at $83.95 per pound as of Thursday afternoon, according to FactSet data.
To be sure, uranium prices have tempered this year after surging to $106.40 in early February — the highest level since 2007. For the year, the metal is off 8%, compared with a 34.7% advance for the VanEck Uranium and Nuclear ETF and an over 20% increase for the Global X Uranium ETF in the same period, according to FactSet data.
Mike Kozak, metals and mining analyst at Cantor Fitzgerald, said the cost of uranium tends to be just a small portion of the total cost of operating a nuclear-power facility, so price actions for the metal typically have a limited impact on the nuclear-power industry.
“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,” Kozak told MarketWatch on Thursday. “There’s a lot of runway before [uranium prices] become a sticking point with a nuclear-power plant.”
Still, uranium prices have gained roughly 60% since early 2023, sparking concerns that the rally may have gotten ahead of itself. But Kozak noted that investors’ positioning in uranium was “max-long and overextended” in the fourth quarter of 2023 and early 2024, and has started to unwind since.
In Kozak’s view, uranium prices are at “a support level,” which gives him “a high degree of confidence” that prices will move higher from here and could surpass the 2024 high of around $107 seen earlier this year.
Shrinking supply could support uranium prices
Shrinking uranium supply, meanwhile, is also pointing to higher prices in the future.
Kazatomprom UK:KAP NATKY, the world’s No. 1 uranium miner, in August slashed its 2025 production plan amid project delays and a lack of sulfuric acid needed to pump the metal from the ground. The Kazakhstan-based, state-owned miner will also decide next month whether to approve a deal to supply concentrates to China’s nuclear industry. Meanwhile, Kazakhstan plans to gradually raise the mineral-extraction tax on uranium mining from the current 6% to 9% in 2025, and up to 18% beginning in 2026.
All these developments could make uranium “increasingly less reliable and less accessible to Western-allied utilities,” Kozak said.
The divergence between uranium prices and the performance of nuclear-energy ETFs suggests that investors should not just look at uranium prices and “make inferences” about how nuclear-related assets will perform as a whole, Rakszawski told MarketWatch in a phone interview on Thursday.
That’s also why 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,” he noted.
Investors wanting to be part of the potential uranium rally can look at funds such as the Sprott Uranium Miners ETF URNM, which provides pure-play exposure to uranium miners and physical uranium. The fund has climbed 15.3% this month, while rising a more modest 9.6% so far in 2024. The Sprott Physical Uranium Trust SRUUF, meanwhile, is up 3.6% in October, though for the year it has fallen 5.8%, according to FactSet data.
“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,” Rakszawski said. “But there is this overarching structural growth story that’s been playing out.”
As usual, here’s your look at the top- and bottom-performing ETFs over the past week through Wednesday, according to FactSet data.
Source: FactSet data through Wednesday, Oct. 16. Start date Oct. 10. Excludes ETNs and leveraged products. Includes NYSE-, Nasdaq- and Cboe-traded ETFs of $500 million or greater.
