In the financial world, nuclear power stocks have been on a rollercoaster, with hedge fund managers like those at Tribeca Investment Partners and Segra Capital Management recently adjusting their portfolios to scale back on what they perceive as overvalued assets, according to a report by Bloomberg. The rally in nuclear tech stocks this year has been significant, fueled by the intersection of Big Tech‘s data center demands and the broader push towards sustainable, low-carbon energy solutions.
Guy Keller from Tribeca, manager of the Nuclear Energy Opportunities Strategy, has expressed concerns over the sharp gains in stock prices, highlighting Constellation Energy Corp. (CEG), up 94% year-to-date, and NuScale Power Corp. (SMR), which soared over 800% before peaking in late November and remains up 500% for the year. The rapid rise has prompted a reduction in risk exposure, although Keller, as noted in the report, avoids short positions, wary of sudden market shifts that could be triggered by new data center projects or policy announcements.
The narrative around nuclear stocks has been one of cautious optimism mixed with skepticism. Lisa Audet from Tall Trees Capital Management remains wary of small modular reactor developers like Oklo (OKLO) and NuScale, even as their stock prices have adjusted downward. High short interest in these companies underscores the market’s uncertainty, with Oklo and NuScale seeing short interest at about 18% and 22% respectively, starkly contrasting with Constellation Energy’s 2%.
The allure of nuclear energy lies in its potential to provide stable, carbon-free electricity, but the sector faces significant challenges, including lengthy development times and a complex uranium supply chain. JPMorgan Chase (JPM) analysts have warned of “NucleHype,” indicating a bubble of sorts driven by enthusiasm rather than fundamental growth, pointing out issues like supply chain constraints and the slow pace of nuclear project development.
Despite the skepticism around nuclear tech valuations, there’s a strategic pivot towards uranium mining and development. Arthur Hyde of Segra Capital told Bloomberg he sees potential in the uranium supply chain, predicting price pressures in 2025 due to its fragmented nature. This has led to a strategic reallocation of investments towards uranium producers in the US, Canada, and Australia, while reducing stakes in US utilities and tech firms.
The political landscape also plays a role, with the incoming Trump administration viewed positively by some in the nuclear sector. Managers like Keller increase exposure to US project developers, anticipating that a pro-nuclear stance from Trump could favor domestic companies.
However, the sector’s future hinges on more than just political winds. Big Tech’s increasing involvement in securing nuclear power for their expansive data operations could soon extend to securing the supply chain, potentially driving further demand for uranium and related assets. As these companies recognize the need for upstream control, significant investments could follow, possibly reigniting interest in nuclear technology stocks if new deals emerge.
Thus, while some hedge funds are dialing back their exposure to what they see as overhyped nuclear tech stocks, others are betting on a more fundamental shift towards securing and developing the nuclear energy supply chain, anticipating that the real growth might be in the commodities and infrastructure needed to support this energy transition.
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