It's certainly not what LL Cool J had in mind when he wrote the lyrics to Mama Said Knock You Out, but the opening lines, "Don't call it a comeback, I been here for years," certainly ring true with nuclear energy. After years of unpopularity, nuclear energy has seen a surge in interest as data center operators scramble to secure an adequate power supply to meet the high power demands of artificial intelligence (AI) computing.
From companies pioneering the development of advanced nuclear reactors to those providing the fuel that makes nuclear power possible, there are a variety of investment opportunities -- but one shines brighter than the rest.
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A winning nuclear (ETF) option
Unlike some exchange-traded funds (ETFs) that hold hundreds of securities, the VanEck Uranium and Nuclear ETF (NLR +0.37%) holds only 29. But don't let its limited portfolio size fool you. The ETF holds a wide range of industry leaders, representing various links in the nuclear energy industry value chain.
NYSEMKT: NLR
Key Data Points
As AI tools have soared in popularity, many data center operators have turned to companies developing small modular reactors (SMRs) to ensure an adequate power supply. Consequently, investors have a great opportunity to gain exposure to these industry leaders by investing in the fund, with NuScale Power and Oklo each holding a 4.5% and 4.3% weighting, respectively.
The ETF also includes established uranium mining companies and nuclear fuel stocks, which mitigates the risk of the more speculative stocks it holds. Cameco, a global leader in high-grade uranium production and a consistently profitable company, is the ETF's second-largest holding. Similarly, Centrus Energy has a prominent position with a 5.8% weighting, and it's one of the few companies that has received regulatory approval to produce the high-assay low-enriched uranium (HALEU) that next-generation nuclear reactors require.
Take a comprehensive approach to the nuclear renaissance
There's strong growth potential for many nuclear energy stocks, but substantial risks exist as many of these businesses aren't generating revenue yet. For those seeking a conservative approach to this burgeoning industry, the VanEck Uranium and Nuclear ETF is a great option.
