The nuclear energy investment boom has taken the world by storm, and “uranium” long forgotten by the market has returned to investment horizons

Judging from recent global financial news topics, the popularity of investment in nuclear energy and enriched uranium basically goes hand in hand with “artificial intelligence,” which has continued to rank at the top of the capital market since 2023. According to investors, 2024 will be a “super harvest” year for nuclear energy stocks and uranium resource stocks.

In order to accelerate the expansion and construction of new data centers to meet the exploding demand for artificial intelligence and cloud services, American tech giants such as Amazon, Microsoft, and Google are focusing on nuclear energy, which is both clean, efficient, and stable, to provide 24-hour uninterrupted electricity to their continuously expanding data centers. Recently, the stock prices of nuclear power concept stocks and uranium mining companies have continued to rise.

Since the collapse of Japan's Fukushima Daiichi nuclear power plant, after experiencing a “hibernation of investment” for more than 10 years, nuclear energy, and uranium, the energy's core fuel, can be described as returning to the eyes of global investors. Uranium, in particular, can be described as one of the “hard commodities” with the worst performance in a long time. This year, uranium prices can be described as extremely sluggish, and the price performance is only better than lithium prices, which have been falling continuously in recent years due to sluggish demand for electric vehicles.

Prices are melting — uranium is one of the worst performing “hard commodities” this year

Why is uranium so important?

Uranium is one of the most important fuels in nuclear energy production, especially uranium-235, which releases enormous amounts of energy through nuclear fission. In nuclear reactors, uranium's fission chain reaction is precisely controlled to generate stable heat energy to generate electricity. As an efficient and clean form of energy, nuclear energy is closely related to the physical properties and fission reactions of uranium.

In a nuclear power plant, a nuclear reactor is the core part. This reactor is a device that obtains nuclear energy by controlling the nuclear fission chain reaction. In nuclear power plants, nuclear reactors use uranium-235 as the core fuel, releasing large amounts of energy through slow neutron-induced fission. This energy is released in the form of heat, and steam is generated by heating the coolant to drive the turbine generator to generate electricity.

Among them, enriched uranium is the core component of nuclear reactors in nuclear power plants. Uranium-235 is the only naturally occurring highly fissionable isotope, but it accounts for only a small portion of natural uranium (only about 0.7%), about 99.3% of natural uranium is uranium-238 (less prone to fission), and uranium-235 (a fissile isotope) accounts for only about 0.7%, which is insufficient to maintain an effective chain nuclear fission reaction. Therefore, in order to effectively use nuclear fission in nuclear reactors, the uranium-235 content usually needs to be increased to about 3% to 5% through enrichment technology. This process is called the uranium enrichment process.

Uranium fuel rods in nuclear reactors are usually made of enriched uranium (containing uranium-235 content). In nuclear reactors, the nuclear fission reaction of uranium-235 releases heat energy, neutrons, and gamma rays. Enriched uranium used in nuclear power plants is commonly known as low enriched uranium (LEU). Its uranium-235 content is between 3% and 5%, and is used exclusively for civil-grade nuclear power generation.

Tech giants spend huge sums of money to promote the construction or restart of nuclear reactors. Combined with recent research data, the uranium market will soon fall into serious supply shortages. Under the catalyst of the recent surge in market enthusiasm for investing in nuclear energy and enriched uranium, the stock price of mining resource companies closely linked to uranium ore, the most basic resource required to restart or build large-scale nuclear reactors, soared rapidly. Investors used real money to embrace uranium stocks that had gone into hibernation.

If the new mine fails to start successfully, the uranium market will experience a serious supply shortage

In the US stock market, the price of the Global X uranium ore ETF (URA.US), which tracks the world's top uranium mining and uranium enrichment companies, surged by more than 7% as of Wednesday. Since September, the price of the ETF had been sluggish for a long time.

US tech giants tacitly embrace nuclear energy

With the full spread of AI technology, especially large-scale AI models and AI applications such as ChatGPT, data centers have become the core facilities for efficiently processing and storing large amounts of data. ChatGPT became popular all over the world in 2023. The big Sora Wensheng video model came out in 2024, and the unparalleled performance of Nvidia, the “seller” in the AI field, for several consecutive quarters may mean that human society will gradually enter the AI era starting in 2024. Large-scale data centers, which can be described as the core large-scale infrastructure project in the AI era, are essential for the efficient operation of generative artificial intelligence applications such as ChatGPT and the updating and iteration of large AI models such as GPT-4O.

Under the current trend of global decarbonization and for a long time to come, nuclear energy, an efficient and stable clean energy source, has become one of the most popular energy sources for tech giants such as Amazon, Google, and Microsoft. This energy with clean, stable, and efficient properties can be expected to provide strong power support 24 hours a day without interruption for their huge data centers. As a result, current support for nuclear energy from global politicians and technology companies is likely to be stronger than at any time since the 1970s.

On Wednesday, tech giant Amazon announced it will fund the construction of several small nuclear reactors in Washington State and invest in nuclear power startup X-energy. Earlier, Google announced on October 14 that it had reached an agreement with the nuclear power startup Kairos Power (Kairos Power) to purchase 500 megawatts of all-weather carbon-free electricity from Kailos' 7 small modular reactors (SMRs). According to reports, the two companies are considering first delivery in 2030 starting with the first SMR and completing full deployment by 2035.

Michael Terrell, Google's senior director of energy and climate, believes that adopting nuclear energy will complement Google's existing solar and wind energy investments and help achieve net-zero energy goals. At the same time, he also emphasized that nuclear power is a source that can provide high-paying, long-term jobs. The US Department of Energy (DOE) estimates that expanding nuclear power production capacity to 2,000 gigawatts by 2050 will require an additional 375,000 workers.

In September of this year, Constellation announced that it had reached a 20-year cooperation agreement with Microsoft to create the “Crane Clean Energy Center (Crane Clean Energy Center)” and restart Unit 1 of the Three Mile Island Nuclear Power Plant. According to the agreement, Microsoft will purchase energy from the restarted nuclear power plant to help achieve its goal of using carbon-free energy to meet the power needs of data centers.

Achieving the goal announced at the COP28 climate conference in December last year, which is to triple nuclear power capacity by 2050, will be a difficult task. This requires the number of reactors built around the world each year, which is equivalent to the sum of the number of reactors built in the past 20 years. However, from France, which loves nuclear energy, and the uncertain Japan, to Italy, which is anti-nuclear, all countries are doing their best.

A major shift in the attitude of the US government

What is most remarkable is the complete shift in the US government's attitude towards nuclear reactors. Although nuclear reactors have been shut down continuously for decades due to pollution incidents or operational difficulties, the US still produces about 30% of the world's nuclear energy. The Palisades plant in Michigan closed in 2022 after nearly 50 years of operation and is currently receiving up to $2.8 billion in federal funding to restart its nuclear reactor. In June, construction of a generator in Wyoming broke ground after the government and Bill Gates promised $3 billion.

A large-scale nuclear power plant located on Sanri Island in Pennsylvania had an accident in 1979, ending what can be called the “first nuclear age” worldwide. Currently, with support from Microsoft and the US government, it is restarting its long-dormant nuclear reactor, which is expected to provide uninterrupted nuclear power support for Microsoft's large-scale AI data centers in the future. Another tech giant, Google, also quoted similar language of support from Microsoft when it announced this week that it had reached an agreement with a startup that wants to build a small modular nuclear reactor.

However, Russia's huge uranium resources and enriched uranium may completely bid farewell to the Western world. This may be the driving factor behind the US government's change in attitude towards nuclear reactors. Russia occupies an important position in all aspects of uranium production, uranium enrichment, and the nuclear fuel supply chain. In particular, in the field of global uranium enrichment, Russia has a strong influence.

According to reports, the US government's ban on importing enriched uranium from Russia officially came into effect in August. Given the country's central position in uranium mining and uranium enrichment manufacturing, the ban may further tighten the uranium enrichment market, thereby encouraging Western investors to continue to pour into global uranium mining companies other than Russia closely linked to uranium mining. Furthermore, Kazakhstan accounts for nearly half of the world's uranium production, and as its uranium tax has tripled, the country, which is critical to global uranium production capacity, may further raise prices to make up for losses.