What happened

Uranium stocks Energy Fuels (UUUU 1.60%) and Ur-Energy (URG) popped on Tuesday, extending the broader rally in uranium stocks from yesterday. Energy Fuels and Ur-Energy popped 11% each by 2 p.m. EDT before closing the day up around 3% each.

If you look carefully at their price performances in recent weeks, these stocks have been among the laggards in the industry, presenting traders and investors with a good opportunity to bet on them even as uranium prices continue to rally. Investors in Energy Fuels also see value beyond uranium.

So what

Uranium stocks jumped on Sept. 13 after uranium prices hit multi-year highs and uranium stocks became the hottest topic of discussion on Reddit's WallStreetBest forum.

Today morning, though, Morgan Stanley issued a warning on uranium stocks saying the current rally may not sustain into 2022. That put some pressure on uranium stocks early in trading today, but investors and industry experts alike are taking Morgan Stanley's opinions with a grain of salt.

A person and child happily counting money.

Image source: Getty Images.

For instance, Denison Mines' (DNN 1.54%) CEO David Cates just told BNN Bloomberg he doesn't believe the rally in uranium prices is artificial. 

Last week, CEO of the Sprott Physical Uranium Trust Fund (SRUU.F 1.18%) Rick Rule told Kitco News the bull run in uranium prices has only started. The Sprott uranium fund is largely responsible for propping up uranium prices in recent weeks thanks to aggressive buying in the spot market.

This morning, a user on Reddit even called it the beginning of an effective short squeeze in the uranium physical market, with uranium prices having the potential to explode once utilities enter the already-tight market to purchase uranium fuel to generate electricity from nuclear plants. Nuclear energy is also gaining attention now as a clean energy source at a time when nations across the globe are striving to cut greenhouse gas emissions.

These factors fueled investor interest in small-cap stocks like Ur-Energy and Energy Fuels, with investors in the latter finding another big reason to be bullish: soaring rare earth prices.

UUUU Chart

UUUU data by YCharts

Prices of rare earth metals, which are widely used in industries like semiconductors and electric vehicles, are skyrocketing. Although a uranium miner, Energy Fuels is scaling up production of a mixed rare earth element (REE) carbonate and started deliveries in July. Energy Fuels uses rare but primary ore, monazite sourced from outside to produce REE.

Now what

The spurt in uranium prices after years of wait has reignited the market's interest in uranium stocks. While the chatter on social media could drive volatility in uranium stocks higher, they're unlikely to fall off long-term investors' radars anytime soon.