Nuclear-Energy ETFs Surge as Uranium Prices Remain Rangebound: Is Now a Good Time to Invest?

This October, nuclear-energy ETFs have seen an impressive surge, driven predominantly by the growing demand for carbon-free electrical sources in response to booming electricity consumption from artificial intelligence (AI) applications. Major technology companies are increasingly turning to nuclear energy, resulting in strong performances from ETFs that track uranium and nuclear-energy stocks.

Surging Performance of Uranium ETFs

The VanEck Uranium and Nuclear ETF (NLR) has climbed by an impressive 13.2% so far this month, marking its most significant monthly gain since April 2009. Additionally, the Global X Uranium ETF (URA) has surged by 14.5%, indicating its best performance in over a year amidst heightened investor interest, according to FactSet data.

Tech giants, including Amazon, Alphabet Inc. (Google), and Microsoft Corp., are setting ambitious nuclear power initiatives. Amazon recently signed a deal with Dominion Energy Inc. to develop a small modular nuclear reactor. Google is also pursuing nuclear energy via a procurement agreement with startup Kairos Power. In September, Microsoft signed a 20-year power-purchase deal with Constellation Energy Corp. to rejuvenate a defunct reactor at Pennsylvania’s Three Mile Island nuclear facility.

Nuclear Power’s Renewed Credibility

Although the sector experienced a downturn after the 2011 Fukushima disaster in Japan, nuclear power is making a notable comeback as a reliable and cleaner energy source. Brandon Rakszawski, director of product management at VanEck, noted that nuclear energy boasts a significantly higher capacity ratio compared to intermittent renewable sources like wind and solar power, making it an attractive option.

The Current State of Uranium Prices

Despite the momentum in nuclear-energy ETFs, uranium itself, the primary fuel for nuclear energy, has witnessed a somewhat stagnant performance recently. The price of uranium increased by a mere 2.7% this month, reaching $83.95 per pound, according to FactSet data. Earlier in the year, uranium prices peaked at $106.40 per pound in February, the highest level since 2007. Despite the metal’s decline of approximately 8% this year, uranium-related ETFs have thrived, with the VanEck Uranium and Nuclear ETF up nearly 32% and the Global X Uranium ETF increasing by 18% during the same timeframe.

Insights from Analysts

According to Mike Kozak, a metals and mining analyst at Cantor Fitzgerald, the cost of uranium constitutes only a fraction (between 5% and 10%) of the total operational costs of a nuclear power facility. As such, fluctuations in uranium prices generally have limited effects on nuclear power’s financial viability. “Even if uranium prices double, the companies won’t necessarily shift from nuclear power to alternative energy sources,” Kozak explained.

Nonetheless, concerns have emerged as uranium prices have surged approximately 60% since early 2023. Despite acknowledging that investor positioning in uranium may be “max-long and overextended,” Kozak suggests that the metal is at a “support level,” indicating his confidence in a potential rebound above the previous year’s high of $107 per pound.

Supply Constraints Supporting Higher Prices

Supply limitations are also anticipated to play a crucial role in influencing uranium prices. The world’s largest uranium producer, Kazatomprom of Kazakhstan, significantly reduced its 2025 production targets due to delays and supply constraints. The Kazakh government also plans to incrementally raise the uranium mining tax from 6% to as much as 18% by 2026, further straining future supply.

Investment Strategies in Nuclear-Energy ETFs

The divergence between uranium’s pricing and the performance of nuclear-energy ETFs suggests investors should explore beyond uranium prices when evaluating nuclear-related assets. Rakszawski argues that nuclear-related ETFs offer specialized exposure to the nuclear power ecosystem while mitigating risks tied to high-cyclical uranium stocks.

Investors seeking to benefit from emerging trends in uranium can consider funds like the Sprott Uranium Miners ETF (URNM), which has gained 12.4% this month. The Sprott Physical Uranium Trust (SRUUF) has also seen moderate increases in October, rising 3.4%, but shows a decrease of about 6% on a year-to-date basis.

Conclusion

While risks remain for markets that have experienced significant recent appreciation, the intertwining growth story of nuclear energy and AI-driven electricity demand presents compelling opportunities. Investors looking to diversify their portfolios may find potential in nuclear-energy ETFs as the market continues to evolve, making now an intriguing time to consider investment options in this sector.