Uranium and Nuclear Stocks Surge on Constellation-Microsoft Deal. Who's Leading the Way?

This move underscores the significant demand for nuclear energy from tech giants in the AI era. Following the announcement, Constellation's stock soared by 22% last Friday, pushing its year-to-date gains over 119%, while other uranium and nuclear stocks also experienced a varied uptick.

As technology giants increase capital expenditures to maintain a strong position in the arms race of artificial intelligence, the massive power demand behind data centers is putting pressure on the power grid. Goldman Sachs predicts that by 2030, the proportion of electricity consumption from data centers in the United States will increase from the current 3% to 8%. Additionally, the electrification processes of electric vehicles and manufacturing industries, along with cryptocurrency mining, are also contributing to the growing electricity demand. The International Energy Agency (IEA) forecasts that electricity consumption from data centers, artificial intelligence (AI), and the cryptocurrency sector could double by 2026.

Compared to the fluctuation of wind and solar energy, the round-the-clock operation of nuclear power makes it an ideal choice for energy supply in the AI era. This also explains why AI giants have been accelerating their deployment in nuclear power in recent years. In March this year, Amazon Web Services invested $650 million to acquire a nuclear-powered data center campus near a nuclear power plant from Talen Energy in Pennsylvania. Oracle announced in September that they are designing a data center requiring over 1 gigawatt of power to be powered by three small nuclear reactors. In addition, backed by Sam Altman, nuclear energy startup Oklo, which went public in May, is expected to launch its first reactor by 2027.

According to the latest data released by the World Nuclear Association on September 20, 2023, global nuclear power generation reached 2,602 TWh, accounting for 9% of the overall energy supply. The United States generated 779.2 TWh of nuclear power, approximately 18.6% of the total electricity generation in the country.

Despite the gradual phase-out or early retirement of aging nuclear power plants in some countries, IEA predicts that by 2026, annual nuclear power generation will increase by nearly 3% on average. This growth is driven by the strengthening momentum for Small Modular Reactor (SMR) technology, the completion of maintenance work in France, the restart of nuclear production at several power plants in Japan, and the commencement of commercial operations for new reactors in various markets, including China, India, South Korea, and Europe. At the COP28 climate change conference that concluded in December 2023, 20 countries, including the United States, signed a joint declaration to triple nuclear power capacity by 2050. By then, the number of operational nuclear power plants globally could expand from the current 439 to over 1000, indicating a promising growth outlook for the nuclear energy sector.

Uranium is the primary fuel for nuclear power plants, with Russia controlling nearly half of the world's enriched uranium supply and providing about a quarter of the enriched uranium to the United States. News of a ban on Russian enriched uranium imports and other supply shortages had previously driven uranium prices significantly higher, breaking $100 USD/Lbs earlier this year. As investors continue to assess the US ability to produce enriched uranium and reduce supply concerns, the price of uranium has now fallen to around $80 USD/Lbs. However, looking at the demand side, data from the World Nuclear Association shows that global uranium demand in 2024 is projected to be 67,517 tonnes U, with the United States and China having the largest demand at 18,137 tonnes U and 13,132 tonnes U respectively, highlighting a significant supply-demand gap in the uranium market.