Sunday, January 19, 2025

Going Nuclear

With the advent of artificial intelligence (AI) and its related uses, potential and current, ranging from natural language processing to pictorial generation (like the one used for this post), processing power overall is increasing exponentially, and with it, the need for more energy consumption. The majority of the Magnificent 7 companies, true to their description, were planning to invest in data centres, lots of them, to fuel their AI applications and projects, literally and figuratively. 


On the literal sense, to feed the power guzzler of required of AI generation, and the current trend of weaning away from traditional fossil fuels, nuclear is the next best way to go. The large technological companies are positioning themselves for this old-new power source, either by reviving old plants, positioning their data centres near existing ones, or developing breakthrough nuclear tech (i.e., fusion), or a combination of the choices.



Picture generated by Meta AI


Investment Opportunities

With an estimated annual growth of 27.67% between 2025 and 2030, the global AI market size is expected to grow to almost USD 830 billion by the end of the said period1. Barring the factor of improved power efficiency within the AI hardware and software themselves, this meant a huge boost in nuclear energy and whatever that is associated with it.


There are a few investment opportunities stemming from here, ranging from investing in the raw material that powers nuclear fission energy itself, that is uranium, along with the mining companies, to operators of nuclear power plants and their suppliers. For retail investors, there are a few ways to get exposure to nuclear counters (not radiation) such as via exchange traded funds (ETFs). In the U.S. markets, there are a few ETFs that one can get a toehold on, such as Global X Uranium ETF (NYSEARCA: URA) which has a majority of mining companies and producers in its holdings, or VanEck Uranium and Nuclear ETF (NYSEARCA: NLR) that has power companies that utilises nuclear energy. Or, if one is confident enough to do stock picking, conduct fundamental analysis into the individual companies that make up the mentioned ETFs and buy into them directly.


Investing into nuclear energy is an example of what is known as thematic investing. For AI investing, there are other sectors and themes that one can go into, such as data centre real estate investment trusts, the Magnificent 7 stocks themselves and the “shovels and barrels” that push the AI revolution (Nvidia anyone?). A thorough understanding of one’s investment philosophy, principles and methodology is needed before considering of whether these counters are useful for his/her portfolio.


Disclosure

The Bedokian is invested in Nvidia, and not invested in URA and NLR.


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Disclaimer


1 – Artificial Intelligence – Worldwide Market Size. Statista. Mar 2024. https://www.statista.com/outlook/tmo/artificial-intelligence/worldwide#market-size (accessed 18 Jan 2025)


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