One of the most important trends in nuclear energy is the development of small modular reactors (SMRs). Instead of traditional nuclear power plants that take up a lot of space and take a long time to build, SMRs offer a next-generation way to produce nuclear energy. With small modular reactors, nuclear energy can hopefully be produced at lower cost, with more flexible construction, rapid deployment, and enhanced safety.
SMR technology is not yet commercially available. Research and development are still underway. But on Aug. 6, nuclear energy company Oklo (OKLO -4.00%) announced that it has reached "criticality" in its small modular reactor in Texas. That means Oklo's SMR is able to produce a steady energy. According to Bloomberg reporting, Oklo's SMR is the fifth nuclear reactor of its kind to reach this level of capability.
Although a lot of work remains to be done, Oklo's announcement is a good sign that small modular reactors might someday be ready to start producing nuclear energy. Let's look at two nuclear energy exchange-traded funds (ETFs) that might benefit from continued progress in SMR technology -- and see if nuclear ETFs are worth adding to your portfolio.
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VanEck Uranium and Nuclear ETF (NLR): 4.4% Oklo stock
The VanEck Uranium and Nuclear ETF(NLR -0.55%) offers the ability to make a targeted investment in nuclear energy. Along with nuclear power stocks like Oklo, this fund's 28 stock holdings include utilities and companies that provide services to nuclear facilities.
As of this writing, Oklo shares make up about 4.4% of the fund's holdings. Other top stock holdings in the ETF include Constellation Energy (CEG +0.11%) (8.67%), Cameco (CCJ +0.30%) (7.95%), and Public Service Enterprise Group (PEG +0.88%) (6.45%).
In the past five years, the VanEck Uranium and Nuclear ETF has delivered average annual returns (by net asset value) of 18.4%, but the fund has struggled more recently -- its shares are down by about 3.9% in the past year.
NYSEMKT: NLR
Key Data Points
Global X Uranium ETF (URA): 6.2% Okla stock
Another way to buy into the future opportunities of nuclear energy is to invest in the Global X Uranium ETF (URA +0.07%). This fund holds 58 stocks in companies involved in nuclear energy, nuclear component production, and uranium mining.
Okla stock makes up about 6.2% of the fund's assets. Other top holdings include Cameco (22.2% of the fund), Sprott Physical Uranium Trust (SRUUF -0.15%) (6.4%), and NexGen Energy (NXE -0.10%) (6.06%).
The Global X Uranium ETF has outperformed the VanEck fund in the past five years, with average annual returns (by net asset value) of about 19.3%. In the past year, the Global X fund is up about 4.3%.
NYSEMKT: URA
Key Data Points
Why buy NLR or URA -- or not
Oklo's progress in small modular reactors is potentially good news for investors in these two nuclear energy ETFs. If you want to make a targeted investment in the future of nuclear energy without buying individual shares of Oklo stock, the Global X Uranium ETF includes a slightly larger percentage of Oklo stock, with Oklo as one of its top three holdings.
But these nuclear ETFs can be especially risky. Small modular reactors, and the nuclear energy industry as a whole, are not guaranteed to succeed. The SMR technology is still speculative. Nuclear power plants might face some unique delays, regulatory risks, and resistance from neighbors.
And these funds are not cheap to own. The Global X fund charges an expense ratio of 0.69%, and the VanEck fund charges 0.52%. If you are strongly bullish on the future of nuclear power and you want to make a concentrated bet on this technology, these ETFs can offer it. But beware of the risks.
