The Resurrection of Nuclear Power

Restarting Three Mile Island shows fear of reactors is subsiding

Tom Preston

Who had “Microsoft Resurrects Three Mile Island” on their bingo card? Er, not me. When Microsoft (MSFT) announced plans to fire up the long-dormant nuclear power plant, it was a sign that maybe nuclear had come full circle.

In the 1970s, nuclear power was often depicted with a skull and crossbones. It was scary stuff. You had the ballistic missile stand-off between the US and Soviet Union, Hiroshima was in living memory, and the end of the decade brought the meltdown at Three Mile Island. If there ever had been “peak nuclear,” it was long over and the industry was on the downslope. The public became convinced that the benefits of nuclear power just weren’t worth the risks. The Nuclear Regulatory Commission, which had approved an average of 12 reactor permits per year before 1978, issued none from 1979 to 2012.

https://abcnews.go.com/US/construction-nuclear-reactors-approved/story?id=15549775

Then the internet began to cry out for more electricity. If it’s just cat videos and online shopping, the power requirements of the server farms that run the internet are large, but manageable. But now that AI is showing its possibilities and crypto is growing as a means of payment, the demand for more electricity to run all that processing is beyond what current electric plants can offer. That’s where nuclear power comes in. But the cost is a major barrier to entry.

But the mega-cap companies could handle it. Microsoft — worth $3.7 trillion — can bankroll the initial expense of building a new reactor or restarting an older nuclear power plant. Constellation Energy (CEG) — worth “only” $101 billion — owns Three Mile Island, and its partnership with Microsoft means it will have the cash to bring the reactor back online. But any electricity from it will be for the benefit of Microsoft, not anyone else.

https://www.foxnews.com/tech/artificial-intelligence-fuels-big-tech-partnerships-nuclear-energy-producers

And other mega-caps like Google (GOOGL), Apple (AAPL) and Amazon (AMZN) aren’t going to be left behind. Those three all have relationships with companies that build smaller, modular reactors. Google is working with privately held Kairos Energy, and Apple and Amazon are both working with NuScale (SMR).

The pro-nuclear argument from processing-intensive businesses makes sense. But it’s not alone. Concerns about greenhouse gasses and global warming from carbon-based energy production have made nuclear power a possible alternative. A nuclear plant doesn’t produce much greenhouse gas and can be scaled up or down to power a large city or a single data center.

https://climate.mit.edu/explainers/nuclear-energy

On the other hand, the uranium needs to be mined and isn’t renewable. Plus, the radioactive waste requires long-term containment, and the risk of fatal accidents isn’t zero.

The buy-in from environmentalists isn’t 100%, but renewable power has its own problems and nuclear doesn’t contribute to global warming or leave piles of worn-out aluminum turbine blades.

In addition, the growing consensus around nuclear means the market, always looking toward the future, is recognizing it as a growth opportunity. If an investor wants to participate in nuclear power, there are four paths.

The first are companies like Oklo (OKLO), Nano Nuclear Energy (NNE) or NuScale Power (SMR) that are directly involved building nuclear plants.

The second are companies like Cameco (CCJ) or Centrus Energy (LEU) that mine uranium.

The third are power companies like Constellation (CEG) or Vistra Corp (VST) that want to expand their nuclear footprint.

And fourth are exchange-traded funds (ETFs) like NLR, NUKZ, URAN and URA that hold portfolios of companies involved in uranium mining, nuclear power and associated services.

All are up over the past 12 months but are fairly volatile. While a bullish case can be made for them, an investor might want to consider these stocks longer-term holds and ride out any short-term price swings.

Tom Preston, tastylive chief market strategist, is responsible for the brokerage’s trading strategy, client-facing trading software and futures trading products. He contributes to Luckbox magazine and writes tastylive's Cherry Bomb newsletter. He's been trading options since 1992.  

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