Uranium and nuclear energy stocks have been on a tear since mid-2023. I’ve been bullish on the sector since March 2023 and have written a few articles on InvestorPlace about the bullish tailwinds that favor uranium. I have also argued that there’s a difference between a long-term thesis and a short-term trade, and in the short term, it does look like the party may be over… at least for now.
The key term here is “for now.” On a long enough timeframe, nuclear energy stocks should continue to thrive because of the incredible electricity requirements demanded by artificial intelligence, blockchain technology, and cryptocurrency mining. These industries aren’t going away and they will continue to grow over the long term.
But short-term action is more based on sentiment, which makes me wonder how nuclear stocks will perform in the months ahead if Nvidia (NASDAQ:NVDA) stock has truly topped.
I say this because I do believe some of the exuberance in nuclear energy stocks has been driven by the realization that you can’t really have AI unless you have power. Nuclear is the only efficient way to provide that power as AI permeates more of society. I distinguish between more traditional utility companies and nuclear here purely because the performance and volatility characteristics of stocks in each respective sector look very different. Utilities are more of a bond proxy in the short term, while nuclear is more of an AI proxy in the long term.
Short-term volatility aside, the investment case for uranium remains intact.
Governments around the world are increasingly rethinking their position on nuclear energy as geopolitical risk rises and the urgency to find truly clean energy sources increases. Nuclear is a stable, relatively low-carbon energy source and will thus play a key role in the global energy transition.
The Bottom Line
From that perspective then, for long-term investors, it really doesn’t matter what the global stock market does over the next few months. The demand for nuclear power will continue to increase for several decades to come. I just think short term, a lot may be priced in, and if Nvidia continues to trend lower, it will take some of the excitement out around AI and nuclear energy as a result. That’s a good thing though as it allows for more opportunity to buy in at a lower price point before the next major surge likely takes place.
So, have nuclear energy stocks topped? I think it depends on if Nvidia has topped. And it increasingly looks like Nvidia stock is in a correction.
On the date of publication, Michael Gayed did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
