Source: Wall Street See

With the fastest growth in electricity demand in over a decade, nuclear energy is gradually becoming mainstream, and new investment opportunities are beginning to emerge...

On October 24, Bank of America Merrill Lynch analysts Jared Woodard, John Glascock, Phoebe Block, released a report stating that since 2019, the performance of nuclear energy-related companies has been consistently leading the industry. The institution's nuclear energy ETF has risen by 27% annually, while the MSCI World Index, which tracks global equities with the same industry weight, has only increased by 14%.

Bank of America Merrill Lynch recommends investors to focus on three ETFs, as they believe holding funds in physical uranium... $Exchange Traded Concepts Trust North Shore Global Uranium Mng Etf (URNM.US)$ Tracking the top uranium mining and uranium enrichment companies globally, $Global X Uranium ETF (URA.US)$ and $VanEck Uranium and Nuclear ETF (NLR.US)$ should continue to perform well in the long term.

Nuclear energy is "completely overwhelming," with a future comparable to AI.

In the past year, electrical utilities and uranium ETFs received an inflow of $1.6 billion, while outflows for "clean energy" funds were $2.4 billion. The assets under the nuclear energy ETF have surpassed other clean energy funds, with total assets exceeding $6 billion, while assets of other popular clean energy funds like ICLN have dropped from a peak of $22 billion to $5.5 billion in just three years.

In the second quarter of 2024, electrical utilities bookings increased by 35% year-on-year. Andrew Obin said, "As the lifespan of nuclear power plants extends, operating times will be extended from 30-40 years to 60-100 years, and demand will continue to grow positively."

Behind the strong demand, there is the cost-effective advantage of nuclear energy. Over the past 50 years, nuclear energy has avoided 60 gigatons of carbon dioxide emissions. The average 'normal running time' of nuclear power plants is 93%, much higher than wind energy at 35% and solar energy at 25%.

Best Return on Investment: For every 1 joule invested in nuclear energy, the return is 75 joules, while fossil fuels yield around 30 joules, and concentrated solar energy only yields 9 joules.

High Cost-effectiveness of Nuclear Energy: Calculated on a 'full package' basis, the average cost of building and producing nuclear power is $96 per megawatt-hour, compared to $146 for wind energy and $109 for solar energy.

Efficient Land Use: A 1000-megawatt nuclear power plant requires 1.3 square miles of land; a solar power plant of equivalent scale requires 45-75 square miles, while comparable wind energy needs 260-360 square miles.

In addition, nuclear energy is also unrivaled in terms of investment benefits. A report analyzing the returns of the global stock industry over the past five years concluded that 'the premium of nuclear energy is obvious.'

As the most diversified ETF URA has an energy weighting of 63%, industry 19%, materials 4.5%, and physical uranium 13%. However, by applying the same combination to the global equity sector (including physical uranium), URA's average annual return exceeds the global equity industry by 15%, with higher risk-adjusted returns.

On average, since 2019, the return on nuclear energy ETF has surpassed the global equity industry by 151% (annual 14%), and has a stronger risk-adjusted return.

Analysts point out that in traditional economic sectors, the exposure to nuclear energy is like AI in the semiconductor or technology sectors, where investors are paying for their potential.

Benefiting from the rise in uranium prices, exchange traded concepts trust north shore global uranium mng etf (URNM) has great potential.

Uranium, as the main fuel for nuclear energy, its price increase directly affects the profits of mining companies. Bank of America Merrill Lynch pointed out in the report that in the future, uranium will face a supply-demand imbalance, and uranium prices will rise.

Demand side: On one hand, the extension of the lifespan of nuclear power plants, the development of new technologies such as Small Modular Reactors (SMRs), have brought incremental demand for uranium.

On the other hand, some major technology companies have recently announced nuclear project agreements, such as Google signing a power purchase agreement with Kairos Power to generate 500MW of energy from a Small Modular Reactor (SMR) by 2035; in July this year, the U.S. Department of Energy announced $0.9 billion in funding for SMR development. A series of events have increased people's interest in new nuclear technology, thereby driving the demand for uranium.

Supply side: Analysis indicates that with increasing demand, uranium supply is expected to be constrained until 2027; coupled with slow mining production and geopolitical risks, uranium supply will be further limited.

Lawson Winder of Bank of America Global Research believes that due to uranium supply shortages by 2027, by 2026, the spot uranium price may rise to $135 per pound, a 60% increase from the current price.

The Sprott Uranium Miners ETF (URNM), which holds physical uranium, also has great potential as a result, with the fund's performance exceeding 230% since 2019, outperforming the semiconductor industry by over 50%.

Exchange traded concepts trust north shore global uranium mng etf (URNM) can provide diversified sources of income.

Since 2019, the Global X Uranium Mining ETF (URA), which tracks top uranium mining and enrichment companies globally, has risen by over 250%. This fund provides access to the entire nuclear energy value chain, including physical uranium.

The holdings of URA, such as, provide investors with diversified sources of income from different regions and industries.$Mitsubishi Heavy Industries (7011.JP)$So far this year, the company's stock price has risen by over 160%. Despite Mitsubishi Heavy Industries accounting for only 2% of URA's weight, it has brought over 3% annual total return to URA.

The fund also extensively invests globally across various countries, with Canada accounting for 50%, the USA for 15%, Australia for 12%, South Korea for 9%, and having presence in other regions in Asia and the Middle East.

Various bullish factors support the performance of NLR.

Since 2019, the VanEck Uranium + Nuclear Energy ETF (NLR) has outperformed global utilities and energy stocks by nearly 60%. Recent reports suggest tech companies are interested in nuclear energy, further boosting the fund's price. Analysts indicate that the price increase reflects people's desire for reliable electricity supply.

NLR has a 40% stake in the utilities sector, with$Constellation Energy (CEG.US)$ Holding shares account for 9% of the fund. Recently, CEG announced a partnership with $Microsoft (MSFT.US)$and reached an agreement to supply power to one of Microsoft's datacenters at a contract price of about $109 per megawatt-hour, higher than the pricing in other electricity markets.

In addition, the US Department of Energy recently forecasted that by 2050, the USA will need an additional 200GW of nuclear power, higher than today's 97GW, and the existing 41 US nuclear power plants can accommodate one to two new reactors, potentially bringing 60-95GW of new capacity. This news also boosted the fund.

Editor / jayden