Key Points
U.S. electricity demand is projected to increase by 35% to 50% by 2040, driven by several factors.
Uranium producer Cameco is well-positioned to meet the growing demand for nuclear energy.
EQT is a major player in U.S. natural gas production and stands to benefit from data centers' demand.
Electricity demand is experiencing its strongest growth in over two decades in the United States, driven by the rapid expansion of data centers, industrial manufacturing, and the electrification of the power grid. According to a report by S&P Global Commodity Insights, U.S. electricity demand will surge between 35% and 50% by 2040.
The rapid increase in demand is putting pressure on the power grid and creating an urgent need for more power-producing infrastructure. Two industries, nuclear energy and natural gas, are both critical to address this growing demand, which bodes well for major producers Cameco(NYSE: CCJ) and EQT (NYSE: EQT). If you have $1,000 to invest, these stocks are smart buys today. Here's why.
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Cameco is positioned to meet the growing demand for uranium
Cameco is a major uranium producer with investments in high-grade uranium mines, including McArthur River and Cigar Lake, in the Athabasca Basin in northern Saskatchewan. It also operates the Key Lake Mill, the world's largest uranium mill, which processes high-grade ore from the McArthur River mine. Finally, it holds a 40% stake in joint venture Inkai, a low-cost, in-situ recovery operation in Kazakhstan.
The company is well-positioned to meet the growing demand for nuclear energy. In recent years, numerous countries worldwide have committed to tripling their nuclear energy capacity by 2050, creating strong demand for uranium and nuclear infrastructure.
While Cameco benefits from growing uranium demand, its investment in Westinghouse (Cameco owns 49% while Brookfield Renewable owns 51%) provides it with diversified upside beyond its mining revenue. Westinghouse provides nuclear technology and design and engineering services for nuclear plants worldwide. In October, Cameco, Brookfield, and Westinghouse entered into an agreement with the U.S. government valued at $80 billion to accelerate nuclear build-out. Last year, Cameco's share of Westinghouse revenue was $3.5 billion while adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) surged 61% to $780 million.
Looking ahead, Cameco has long-term commitments to deliver 230 million pounds of uranium, with an average annual delivery volume of 28 million pounds over the next five years. With strong demand for the nuclear build-out and the uranium needed to power it, Cameco is in an excellent position to capitalize.
EQT leads the way in low-cost natural gas production
EQT is a pure-play natural gas producer in the United States with a strong presence in the Appalachian Basin. The company is one of the only large-scale, vertically integrated natural gas producers in the U.S. and has a massive asset base of about 2.3 million gross acres.
The company's projected unlevered free-cash-flow breakeven for 2026 is roughly $2/MMBtu (million British thermal units), which is one of the lowest in the industry. This efficiency is largely driven by its combo-development strategy, which involves developing large-scale, multi-well pads to maximize logistics and capital efficiencies. As a low-cost producer, EQT has a strong advantage that provides it with resilience across commodity cycles.
The company has approximately 45 gigawatts (GW) of data center capacity under construction globally and has secured major supply agreements for large-scale data center projects, including the Homer City Redevelopment for up to 665 BBtu/d (billion British thermal units per day) of natural gas. Looking forward, EQT is strongly positioned to capitalize on the structural baseload power demand driven by artificial intelligence data centers and the electrification of the grid.
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Courtney Carlsen has positions in Cameco, EQT, and S&P Global. The Motley Fool has positions in and recommends Cameco, EQT, and S&P Global. The Motley Fool recommends Brookfield Renewable. The Motley Fool has a disclosure policy.
