Investing in Cameco and NuScale Power could yield impressive returns over the next decade, making them attractive options for forward-thinking investors.
While nuclear energy might not initially appear to be an exciting market for those focused on growth, it is important to consider the underlying dynamics. This sector is largely dominated by established energy companies such as Duke Energy and NextEra Energy, and projections indicate that the global nuclear power market will expand at a modest compound annual growth rate (CAGR) of 2.9% from 2024 to 2029, as reported by Markets and Markets. Yet, this market is experiencing a shift due to geopolitical tensions in fossil fuel-producing regions, the push for green energy initiatives, and the rising demand for power from data centers driven by cloud computing and artificial intelligence applications. As a result, numerous countries and corporations are increasingly investing in nuclear power as a viable energy source.
For investors, there is the option to remain with these slower-growing giants like Duke and NextEra to benefit from this broader trend. However, there are also opportunities in more speculative ventures within the higher-growth niches of the nuclear energy market that present the potential for significant returns.
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Among these speculative opportunities, Cameco (CCJ 10.96%) and NuScale Power (SMR 2.77%) stand out. While both stocks may represent a higher level of risk in the short term, a small investment of $100 could potentially transform into significant returns over the next decade, making them enticing choices for investors looking for growth within the nuclear sector.
Explore the Potential of Cameco in the Uranium Market
Cameco is a prominent Canadian uranium miner with operations spanning across Canada, the United States, and Kazakhstan. As of 2024, it produced approximately 17% of the world’s uranium, establishing itself as the second-largest producer after Kazakhstan’s Kazatomprom. This strategic positioning in the uranium market allows Cameco to play a vital role in meeting the growing energy demands fueled by the global shift towards nuclear power.
In a significant move in late 2023, Cameco collaborated with the infrastructure investment firm Brookfield Asset Management to acquire Westinghouse Electric, a leading designer, builder, and supplier of nuclear power plants. With Cameco holding a 49% stake and Brookfield owning the remaining 51%, this partnership is expected to stabilize Cameco’s earnings by providing more consistent returns compared to the cyclical nature of the uranium business. Additionally, this alliance positions Cameco as a preferred uranium supplier for Westinghouse’s nuclear plants, enhancing its market reach.
Nonetheless, like most miners, Cameco’s growth trajectory is closely tied to the market price of uranium. Currently, the spot price stands at approximately $70, but analysts from Bank of America predict it could soar to $140 by 2027. This anticipated increase is driven by the surging energy requirements from the cloud computing and AI sectors, which are rapidly becoming more energy-intensive.
From 2024 to 2027, market analysts forecast that Cameco’s revenue and earnings per share will grow at impressive CAGRs of 8% and 85%, respectively, as uranium prices rise. While the stock may appear expensive at 63 times forward earnings, its consistent growth and pricing power could validate this higher valuation, making it a compelling option for investors seeking exposure to the nuclear energy market.
Discover the Innovations of NuScale Power in Small Modular Reactors
NuScale Power is at the forefront of innovation in the nuclear energy sector, specializing in the production of small modular reactors (SMRs). These reactors are prefabricated, transported, and assembled on-site, presenting a more flexible and cost-effective solution for building nuclear power plants in locations that may not accommodate traditional larger facilities. This modular approach significantly reduces both the time and expenses associated with constructing new plants.
NuScale’s SMRs are designed to fit within vessels that are just 15 feet in diameter and 65 feet tall. Impressively, they are the only SMR designs that have received standard design approval from the U.S. Nuclear Regulatory Commission (NRC). Initially, the approval covered reactor modules capable of generating up to 50 megawatts of electricity; however, for NuScale to be more economically viable compared to conventional coal-fired power plants, each module needs to produce at least 77 megawatts. This recent development has caused NuScale’s stock price to rise significantly following the NRC’s approval of its first 77-megawatt design, paving the way for further expansion in the U.S. market.
Currently, NuScale primarily derives its revenue as a subcontractor for a 462-megawatt power plant project with Romania’s RoPower. However, the company’s revenue is projected to surge over the next few years as it rolls out its first operational plants within the United States. Analysts anticipate that from 2024 to 2027, NuScale’s revenue could grow at an astounding CAGR of 118%, driven by the increasing demand from businesses, particularly in the data center sector, as they look to integrate more SMRs to support their evolving cloud and AI technologies.
Despite not yet being profitable and trading at 11 times its estimated sales for 2027, NuScale presents a compelling growth opportunity. The potential for accelerated growth in the coming decade, as SMRs revolutionize the nuclear power landscape, positions it as an attractive choice for investors willing to speculate with a modest $100 investment.
Bank of America is an advertising partner of Motley Fool Money. Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America and NextEra Energy. The Motley Fool recommends Brookfield Asset Management, Cameco, Duke Energy, and NuScale Power. The Motley Fool has a disclosure policy.
