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The momentum of “Big Tech” building data centers to expand Artificial Intelligence is accelerating rapidly. Amazon, Google, Meta, and Microsoft are in a virtual “arms race” in this prolific and historic buildout. The limiting factor, however, is electricity – but not just any kind of electricity…24/7/365 uninterruptible electricity. These data centers must run around the clock, every day. Tech’s other challenge – they want the power to be not just uninterruptible, but clean and “non-carbon emitting.” What kind of power generation meets that criteria? Only hydro and nuclear power…and hydro is strictly limited to those geographical regions of the country that support it (it is also expensive and fraught with environmental and social challenges).
Big Tech has now come out in “full-throated” support of the expansion of nuclear power in the U.S. Amazon and Microsoft have already entered into long-term power purchase agreements with nuclear power generators. These initiatives are supporting the restart of multiple shuttered reactors in the U.S. The problem is, there are only so many idled reactors that can restart…and the energy needs for Big Tech are astronomical. It appears that the tech companies are thinking long-term by also supporting the rapidly emerging small modular reactor (SMR) industry. Additionally, it is expected that virtually all currently operating nuclear plants in the U.S. will be life-extended out to 80 – and possibly even 100 years of operation (current avg. age of U.S. reactors is ~42 yrs.)
This new demand driver has emerged amidst a structurally undersupplied uranium market. According to our internal modeling, the supply shortfall for 2024 will be ~35 million pounds. The supply response thus far has been insufficient. Brownfield mine restarts have not hit their production targets. Production expansion in Kazakhstan (the world’s largest producer) continues to come in lower than stated expectations. This persistent supply shortfall has been generally accretive for the uranium price, rising from $18/lb. in 2016 to over $100/lb. last January. However, utilities and producers drawing down inventories to historically low levels during the bulk of 2024 has led to a pullback in the spot uranium price now sitting in the low $70’s/lb.
The uranium stocks largely took a pause this past year, and very surprisingly finished mildly lower in 2024 despite the powerful forces aligning for nuclear power for which uranium is the necessary and unsubstitutable commodity.
We strongly believe that both the uranium price and uranium stocks will play a serious game of “catch up” in 2025.
One sophisticated long-time industry observer recently said, “...uranium investors should not be getting another chance to get in at these prices given the fundamental backdrop.”
Maybe that’s also why well-respected U.S. investment bank Morgan Stanley has made uranium their “Top Pick” amongst all commodities for 2025! |
