Nuclear Power’s Revival: What It Means for Cameco Amid AI Growth

The rise of artificial intelligence (AI) is prompting cloud computing firms to explore nuclear energy as a power source. Given the importance of nuclear power, demand for uranium is set to increase.

Let’s examine developments in the nuclear sector and analyze how they might influence uranium miner and nuclear service provider Cameco (NYSE: CCJ).

AI Drives Interest in Nuclear Energy

With major tech firms racing to establish AI-focused data centers, they are in need of cheap and dependable energy sources. AI training and inference require substantial amounts of electricity, with nuclear energy and natural gas being the two best options.

Before last year, no new nuclear plants had been built from scratch in the U.S. for over 30 years. The recent start-up of a nuclear facility in Georgia marked the first in the nation since 2016. This project faced years of delays and cost overruns, highlighting the challenges of restarting nuclear power in the U.S.

Despite these hurdles, the demand for AI-related power has drawn renewed attention to nuclear energy. In March, Holtec International secured a conditional loan guarantee of up to $1.5 billion from the Department of Energy (DOE) to restart a nuclear facility in Michigan. This plant had been shut down in 2022 by Entergy and was supposed to be decommissioned. Now, due to rising energy demands, Holtec is planning to revive it.

Additionally, last month, Microsoft entered a long-term agreement with Constellation Energy to reboot the notorious Three Mile Island nuclear plant in Pennsylvania. This 20-year contract aims to reopen the plant by 2028 to power Microsoft’s data operations. Notably, Three Mile Island was the site of the worst nuclear accident in U.S. history when a meltdown occurred in 1979, leading to the shutdown of one of its reactors in 2019.

Meanwhile, Alphabet has signed a deal with Kairos Power to obtain electricity from developing small modular reactors (SMRs). The goal is to have the first operational SMR by 2030. SMRs are significantly smaller than current U.S. nuclear reactors. Currently, two SMRs are operational in China and Russia, with one test unit in Japan.

Image source: Getty Images.

Cameco: A Major Player in the Shift to Nuclear

Cameco stands to gain as nuclear energy regains interest, especially with its ownership in three major uranium mines and a 49% stake in Westinghouse Electric Company, which provides essential technologies for the nuclear sector.

Increased interest in nuclear power may lead to higher uranium prices. Although there isn’t a dedicated uranium exchange like for metals such as gold or silver, the past 15 years have seen significant price fluctuation. After skyrocketing to about $140 in 2007, uranium prices plummeted to $20 to $25 per pound following the Fukushima disaster in 2011.

In recent years, prices had been on the rise, fueled by the predicted demand increase from nearly 60 new nuclear plants expected to be operational by 2030, predominantly in Asia. Concurrently, low prices forced high-cost mines to close and canceled exploration projects, thus tightening supply.

Earlier this year, spot uranium prices topped $100 per pound, but by the end of August, they had settled back around $80. Even prior to the Alphabet announcement, analysts at Bank of America were bullish, projecting prices could reach $135 per pound in 2026.

Cameco typically sells its uranium through long-term contracts, meaning that short-term spot price fluctuations will have limited immediate effect on the company’s earnings. For instance, Cameco predicts that if uranium prices hit $120 in 2026, its realized price would be approximately $70 per pound, compared to $67 per pound if prices remain at $80. Over time, as contracts expire, Cameco will benefit from higher realized prices, making its uranium reserves increasingly valuable.

Furthermore, Cameco’s Westinghouse business is poised to prosper as more reactors become operational and there is renewed interest in restarting previously decommissioned plants.

With an increase in nuclear reactors anticipated over the next decade and a push from cloud computing companies towards nuclear energy, Cameco presents a compelling investment opportunity for those looking to benefit from this trend.

A Second Chance at High-Value Investments

Have you ever felt you missed out on investing in successful companies? Now’s your chance to reconsider.

Occasionally, our expert analysts issue a “Double Down” stock recommendation for companies poised for growth. If you’re worried you’ve lost your opportunity, now may be the best time to invest. The potential returns are striking:

• Amazon: An investment of $1,000 since our 2010 recommendation would be worth $21,285!*
• Apple: If you had invested $1,000 in 2008, you’d have $44,456 now!*
• Netflix: A $1,000 investment from 2004 would have grown to $411,959!*

Currently, we are issuing “Double Down” alerts for three remarkable companies, and opportunities like this don’t come often.

See 3 “Double Down” stocks »

*Stock Advisor returns as of October 14, 2024

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Bank of America, Constellation Energy, and Microsoft. The Motley Fool recommends Cameco and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.