Uranium Demand Keeps Growing, How to Invest in a Bull Market?

Uranium Demand Keeps Growing, How to Invest in a Bull Market? 铀需求量有望翻一番,如何在铀牛市中投资?
Published on: Mar 26, 2024
Author: Amy Liu

Artificial Intelligence has brought about a new boom in the market with increased demand for Nvidia (NVDA) chips, but investors may have overlooked the strong link between uranium and AI chips. In January, Bank of America (BAC) analyzed that the uranium market supply and demand tension may continue until 2025, and uranium prices will continue to soar in the next few years.

Uranium advocates are growing as the quest for cleaner fuel alternatives continues to intensify. When it comes to power generation, a single uranium pellet outperforms conventional energy sources. Without uranium, we simply cannot move towards a green future. Of course, it is not recommended that individuals hold physical uranium in their basements. Frankly, it can be a risky move.

But what about investing in uranium stocks? Several companies are doing very well, and macroeconomic tailwinds should boost the industry as a whole. In response to the energy crisis exacerbated by geopolitical tensions, countries are trying to reduce carbon emissions, while the global energy mix is shifting to nuclear energy.

However, supply-side bottlenecks pose a challenge, for example, the time it takes to restart idled mines and the high cost of acquiring basic materials. These factors, as well as geopolitical considerations, have driven up the uranium price, with previously unprofitable mines becoming very popular again as the price of uranium has nearly doubled over the past year.

Market analysts predict that there will be a supply gap of 35 million pounds per year on average over the next decade, due to the 15-year mining cycle for new mines. In addition, there is a huge need for uranium. The World Nuclear Association estimates that the demand for uranium will increase from 65,650 metric tons in 2023 to nearly 130,000 metric tons in 2040.

Cameco to Shine

Cameco (CCJ) is by far the largest player in the uranium industry. This can be seen by looking at popular uranium mining ETFs such as the Global X Uranium ETF (URA), where CCJ accounts for more than 21% of the fund. The company has a market capitalization of $18.13 billion, with plenty of room for growth. Uranium can supply electricity and fuel the lifestyle in the future of artificial intelligence, so Cameco will benefit from uranium demand.

Cameco’s strategic positioning in the uranium industry is solid and undisputed. The company has abundant mineral reserves and diverse sources of supply while playing a key role in the nuclear fuel cycle.

The compounding effects of a global shift to sustainable energy, coupled with geopolitical dynamics and the challenging supply/demand balance, set the stage for a bright future in uranium investments. Over the long term, Cameco has the potential to become a uranium mining company comparable to ExxonMobil (XOM). Cameco has performed well and is a compelling long-term allocation. It may not be as popular as artificial intelligence stock Nvidia, but its products have a huge demand to power all Nvidia chips in the long term.

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