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- AI stocks have hogged the limelight, but another asset cluster has enjoyed a similar boom.
- Uranium and shares in companies that mine it have enjoyed a scorching rally on soaring demand.
- Nuclear energy is back in fashion as more reactors are planned amid a shift away from fossil fuels.
While artificial intelligence hogs all the limelight in the investing world, another under-the-radar asset cluster has been quietly stealing a march on tech stocks.
A blistering bull run is underway in the market for uranium, the radioactive element used to produce nuclear energy. Prices just hit 15-year highs, and are on track for a record annual gain as a move away from fossil fuels increases demand.
That's also fueling a scorching rally in the stocks of uranium miners such as Cameco. The Sprott Uranium Miners Exchange-Traded Fund (URNM) has jumped 42% this year – higher than the 40% advance in the tech-focused Nasdaq 100 index. Cameco's shares rocketed 83% year-to-date.
Uranium is up 55% this year and last week hit $74.50 per pound – the highest level since 2008. In comparison, gold has gained just 7.7%, while US oil prices fell 3.7%.
Heavy metal mania
Demand for the heavy metal has surged as countries from China to India and Russia pursue more nuclear programs to generate more energy while reducing carbon emissions.
About 60 nuclear reactors are under construction globally and will need about 30 million pounds of uranium a year when they start operating, according to a report by mining investment news and analysis provider Crux Investor.
On the other hand, supply of uranium has been constrained by years of underinvestment in the sector following the 2011 Fukushima nuclear disaster in Japan.
The widening demand-supply gap will continue to drive uranium prices higher, according to John Ciampaglia, CEO of Sprott Asset Management, which specializes in precious metals and real assets.
Uranium prices have jumped "about 150% in the last two years, and we think there's more room to go," he recently told CNBC.
Ciampaglia blamed the "major supply deficit" for the surge: "That's really a function having a lost decade where we did not invest in this technology. As a result, we did not invest in a lot of mining."
China leads the race
About 800 gigawatts of new nuclear power generation may be needed globally by 2050 to meet energy-transition goals, according to a report by asset manager Global X ETFs. China is expected to lead the atomic-energy race in this century.
By 2060, China should be generating about 18% of its electricity from nuclear plants in the world, up from about 5%, Rohan Reddy of Global X wrote in the report.