Nuclear energy stocks have been performing well during Donald Trump’s second term in the White House.Megan Varner/Reuters
Americans have at last found something they can agree on: nuclear power. This unusual consensus in a fractured nation is translating into big gains for nuclear-themed stocks such as Saskatoon-based Cameco Corp. CCO-T
Is there still an opportunity to tap into a hot sector embraced by both left and right?
Nuclear power is part of the renewable energy landscape, a collection of stocks that have been performing well for investors during the first year of Donald Trump’s second term as U.S. president.
Even as Mr. Trump rails against wind farms and extols the virtues of oil and gas, renewables are showing that they can withstand unfavourable political winds.
The iShares Global Clean Energy ETF, an exchange-traded fund that provides exposure to companies such as First Solar Inc., Vestas Wind Systems A/S and Bloom Energy Corp., a fuel-cell company, has risen nearly 50 per cent so far this year, as of Friday morning.
The return is well ahead of the 16-per-cent gain for the S&P 500 and trounces the 2.4-per-cent nudge by the index’s traditional energy sector over the same period.
But when Republicans and Democrats find common ground on an energy source, wow.
Pew Research Center found that 59 per cent of Americans favour expanding nuclear capacity in the country, according to a survey of adults earlier this year. That’s up from 43-per-cent support in 2020, while support for wind and solar fell by double-digits over the same period.
Pew Research also broke down the results of its survey by the political affiliation of the respondents, which is where things get really interesting.
Sixty-nine per cent of Republican voters and Republican-leaning independents support nuclear power plants, versus 52 per cent of Democrat voters and Democrat-leaning independents – for a difference of just 17 percentage points.
That’s the narrowest spread of opinion among the six energy sources that Pew Research examined, and the one source of renewable energy favoured by Republicans.
The West wants in on nuclear power plants. Are they ready to buy this time?
Consider that 39 percentage points separated Democrats and Republicans on their views toward wind turbine farms, with Democrats overwhelmingly in favour and Republicans not.
And 52 percentage points separated them in the case of offshore oil and gas drilling, where Republicans champion expansion and Democrats do not.
Nuclear power is not the most popular energy source among any one group of voters. But it is increasingly looking like a strong compromise.
More people are coming around to nuclear power’s strengths: It can produce large amounts of clean energy without being dependent on weather conditions.
It is also emerging as a top bet among investors.
The Global X Uranium ETF, which tracks uranium producers and nuclear energy stocks and serves as a proxy for investor enthusiasm, has surged 110 per cent this year.
This week, you could see the attraction.
The U.S. government signed an agreement with Westinghouse Electric Co. and its Canadian owners – uranium producer Cameco and financial giant Brookfield Asset Management Ltd. BAM-T – to build up to eight nuclear reactors, using Westinghouse technology, in the United States, valued at US$80-billion or more.
Westinghouse is not publicly listed. But Cameco shares jumped nearly 23 per cent after the agreement became public on Tuesday.
Market Factors: Two stocks to play surging nuclear power demand
Brookfield Renewable Partners LP BEP-UN-T, the renewable-energy arm of Brookfield Asset Management, initially gained 9 per cent in early trading, before the rally faded (full disclosure: I own units).
There could be more bumps ahead.
Nuclear reactor construction can be prone to cost overruns and lengthy delays.
As well, investor infatuation with nuclear power has been brewing for some time, leading to concerns that the sector may be overheating.
In one possible sign of investor exuberance, Oklo Inc. OKLO-N, a nuclear technology startup, is now valued at US$20-billion after the stock surged 547 per cent this year – even though the company reported no revenue over this period.
Still, the long-term growth prospects of nuclear power are beguiling. The growth comes with the backing of the U.S. government as it seeks to address an aging fleet of reactors and an electricity grid that needs to adapt to the needs of power-hungry AI data centres.
The U.S. government’s investment, announced this week, “could spur exponential growth far beyond its initial scale, driving a massive expansion of the nuclear supply chain, materially reducing costs for future reactor builds and servicing,” Frederic Bastien, an analyst at Raymond James, said in a note this week.
The resurgence of renewable energy stocks this year suggests that you don’t always need political cohesiveness to drive gains. But as the nuclear-themed rally is demonstrating, political agreement certainly doesn’t hurt.