Reuters has reported that President Trump is planning to sign an executive order to speed up the permitting and construction of nuclear energy power plants in the U.S. as early as today. The market didn't ask questions and simply bid up nuclear stocks today.
As a result, anything related to nuclear energy was up big, with Oklo (OKLO 2.11%) up as much as 31.3%, Centrus Energy (LEU 2.41%) up 26.5%, Nano Nuclear Energy (NNE 3.84%) jumped 29.7%, NuScale Power (SMR +0.34%) was up 18.3%, Energy Fuels (UUU +0.34%) rose 19.1%, and Uranium Energy (UEC 4.83%) popped 26%.
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NYSE: SMR
Key Data Points
What we know right now
As of this writing, at 1:30 p.m. ET, there's no executive order signed, and the most we have is reporting from Reuters. It says the order would invoke the Defense Production Act and direct the Departments of Energy and Defense to speed up the construction of new nuclear reactors.
The reporting indicates that reliance on Russia and China for enriched uranium is the basis for the order, with the administration hoping to push development on both private and public land.
As with most executive orders, the impact may not be as big as investors might think. It will still take many years to permit and build nuclear power plants, and it's not clear if they would be cost-effective today anyway. So, the sentiment may be correct by the administration, but the financial impact for these companies may disappoint.
Fundamentals and nuclear energy
The bounce is almost entirely built on speculation because most of these companies are either very low revenue or pre-revenue. They're developing technology or solutions for the industry, but that hasn't even manifested in paying customers to this point.
OKLO Revenue (TTM) data by YCharts
As investors, that's a big risk to take for an industry that moves in decades, not months or years. The Obama administration tried to rejuvenate the nuclear industry over a decade ago, and that didn't work, so it's not clear why this would be different.
Nuclear energy and hype cycles
This isn't the first time the nuclear industry has gone through hype cycles. You can see in the chart that long public stocks like Energy Fuels and Uranium Energy have been extremely volatile for two decades.
But over that time, they haven't generated meaningful or sustainable earnings that investors can count on.
UUU Net Income (TTM) data by YCharts
I don't see any reason to think that's going to change this time around. Changes to the nuclear bureaucracy could take years, and by then, there may be a new administration. Financing and constructing nuclear power plants is also not a straightforward endeavor for utilities that may want to invest in the industry, given the high cost and uncertain payback period for projects.
I think today's bounce will be another short-term move that will ultimately fall back to Earth as the nuclear industry fails to live up to the hype in the market today. An executive order doesn't change the challenge the industry has building projects economically, and until that changes, it's an area I'll stay out of.
