Why the Nuclear Sector Still Has Room to Grow

Since the announcement of Microsoft (MSFT) working with Constellation Energy (CEG) to restart a reactor at the Three Mile Island plant, publicly traded companies in the nuclear sector have seen significant stock price changes. New investors looking at the nuclear renaissance story are now assessing whether the opportunity has come and gone for capitalizing on renewed interest in nuclear energy. Considering that much of the actual work has yet to begin, there is still potential for significant growth.

• TerraPower (private) has started construction of the first utility-scale reactor plant in the U.S. Meanwhile, the anticipated nationwide build-out could see as many as 20 reactors announced in the near future.
• The Department of Energy (DOE) has announced multiple initiatives, grants, and conditional loans to support the nuclear industry. Only a small portion of the support has been released to date.
• While public companies have experienced recent volatility, the private sector has seen funding rounds exceed $1 billion. This indicates a more positive long-term picture.

Earlier this year, TerraPower (private) announced the start of construction for the first utility-scale advanced reactor in the country. The project involves the construction of a 345 megawatt (MW) reactor developed in partnership with GE Vernova (GEV) . The reactor is designed to supply power to as many as 400,000 homes when paired with the energy storage system integrated into the reactor design.

While there are multiple companies benefiting today from the construction of the country’s first utility-scale reactor, this project is only the beginning. The companies partnering with TerraPower are utilizing the opportunity to start building out their manufacturing capacity. Most of the revenue from the project will likely be reinvested into new facilities and personnel while preparing for future larger build-out plans.

See more: NUKZ Constituents Secure Key TerraPower Contracts

During an earnings call earlier this year, leadership from Cameco Corp. (CCJ) detailed the U.S. government’s plans for as many as 20 AP1000 reactors. The AP1000 is a 1,100 MW reactor designed by Westinghouse, which is 49% owned by Cameco. The nuclear equipment manufacturers that stand to realize significant revenue from the construction of these massive power plants have yet to announce the associated supply contracts.

See more: Cameco Sees Path to 20 New US Large-Scale Reactors

Reactor plants cost billions of dollars, and the majority of that money is spent on construction and plant components. Paired with the significant support announced by the federal government, nuclear supply chain companies could announce multiple major new contracts in the quarters ahead.

The federal government has announced multiple initiatives and award programs in recent years to support the domestic nuclear renaissance. Most of the money pledged to the industry, though, has yet to find its way to company balance sheets:

• $17.5 billion for the AP1000 nuclear supply chain
• $2.5 billion in support for reactor restarts by Constellation and Holtec (private)
• $80 billion to build AP1000 reactors between the U.S. government, Cameco, and Brookfield
• $40 billion from Japan for GE Vernova (GEV) small modular reactors (SMRs)

The announcement of some of these programs resulted in significant price action among publicly traded nuclear companies. However, the actual money is yet to reach the companies involved. Future nuclear construction announcements should trigger major supply contract deals across the sector.

See more: DOE’s $17.5B Loan Boosts Nuclear Supply Chain

Recent trading sessions have seen reactor development and nuclear fuel chain companies experiencing significant volatility and pullbacks.

Many investors and short-term traders see the nuclear renaissance as tightly tied to the adoption of artificial intelligence (AI) and the build out of data centers. The nuclear sector has been repeatedly questioned in terms of the long-term potential as the sentiment for continued AI adoption swings wildly week-to-week.

The negative public market sentiment contrasts greatly with recent private market activity. Investors in the private markets must be more comfortable with their capital being locked in place for longer periods of time compared to the public market, due to lower liquidity. With that in mind, some of the recent funding rounds from reactor development companies have been substantial:

• Antares Nuclear (private), a company building small reactors for use by the military, raised $470 million in their latest funding round.
• Valar Atomics (private) is building small reactors for commercial energy and hydrogen production and raised over $1 billion in their recent Series B funding round.

The VettaFi Nuclear Renaissance Index (NUKZX) is designed with the entire nuclear industry in mind, not just reactor developers and uranium miners. The index includes more mature reactor development businesses, such as GE Vernova (GE) and BWX Technologies (BWXT), alongside more junior companies such as Oklo (OKLO) and NANO Nuclear (NNE). NUKZX also holds companies that will benefit from incoming contracting across the supply chain, such as Curtiss-Wright (CW) and Mirion Technologies (MIR).

NUKZX serves as the underlying index for the Range Nuclear Renaissance Index ETF (NUKZ ).

NUKZ Constituents Secure Key TerraPower Contracts

DOE’s $17.5B Loan Boosts Nuclear Supply Chain

Cameco Sees Path to 20 New US Large-Scale Reactors

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