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- Hedge funds are laying bets on uranium, a critical element in nuclear energy, Bloomberg reported.
- The price of uranium has swung up by 125% since the end of 2020.
- While debates on the use of nuclear energy continue, experts see it as key to a future without fossil fuels.
Hedge funds are betting on the growing need for atomic energy.
As a warming planet drives the shift away from fossil fuels, nuclear power has been gathering momentum as an alternative source of energy. For investors, it means there's a lot of money to make in uranium, the primary fuel for nuclear reactors.
According to Bloomberg, hedge funds including Terra Capital, Segra Capital, and Argonaut Capital Partners are among those betting on shares of companies involved in the production of uranium.
Swimming in the stream of investments are producers like Cameco Corporation, Energy Fuels, Ur-Energy, and NexGen Energy.
The price of uranium has risen by a whopping 125% since the end of 2020, and uranium ETF assets grew twenty-fold in the same time, according to Bloomberg Intelligence.
The Sprott Uranium Miners ETF, which holds shares of companies involved in uranium production and also holds the physical commodity, is up 40% this year.
Nuclear power plants produce power by splitting an atom — uranium — which releases large amounts of energy in the form of heat and radiation. Uranium is the most commonly used metal in nuclear plants.
There is not, however, unbridled enthusiasm across all uranium stocks. According to Bloomberg, some that have gained significant value, like Global X Uranium ETF, which has rocketed 30% higher this year, are now being shorted by hedge fund managers who are also on the lookout for shares that could stumble.
According to the International Energy Administration, an estimated $40 billion has been invested into nuclear power every year for the past six years. That number needs to more than triple to reach the $125 billion annual investment required to meet net-zero emissions by the middle of this century.
Nuclear power has been controversial among non-fossil fuel sources of energy since the Fukushima accident in Japan in 2011, when an earthquake caused three nuclear reactors to overheat and leak toxic radioactive elements into the environment. Thousands of people had to evacuate the area, and the site is still undergoing a clean up today.
But as climate change impels governments and economies to commit to net-zero goals, nuclear power is back on the table–which means uranium is, too.