Being an essential component in sustainable and reliable energy generation, the growing interest in nuclear energy has led to an optimistic outlook for Uranium.
Driven by the global shift toward clean energy and increasing energy demands of AI, bullish factors favor a future surge in price for the commodity, making uranium prices a critical point of focus for investors and potentially fueling long-term demand for the metal.
Uranium Demand to Further Soar as AI’s Power Appetite Grows
To keep up with the growing demand for artificial intelligence (AI) and address clean energy requirements, tech giants are turning to nuclear energy to power the energy-intensive data centers for training and operating the large-scale AI models used in today’s generative AI applications.
According to Open AI, as quoted on CNBC, over 200 million people were using ChatGPT on a weekly basis, as of August, double the 100 million weekly active users recorded last November. This data underscores how rapidly AI has been embraced and integrated into daily life, emphasizing the growing need for tech giants to increase their investments in AI.
As big tech companies ramp up their AI development efforts and the global AI market is poised for exponential growth, the resulting surge in energy demand makes investing in cleaner energy sources crucial.
Recent deals by giants like Microsoft, Amazon and Google with U.S. suppliers to purchase nuclear power underscore their commitment to utilizing low-carbon electricity to energize their AI data centers. These are also examples of the increasing collaboration between tech companies and the nuclear power sector.
With an increasing focus on nuclear energy, demand for uranium is set to substantially grow, making uranium ETFs an appealing investment strategy for the long term.
A Closer Look at Tech Giants’ Energy Deals
According to CNBC, Google (GOOGL – Free Report) recently announced plans to buy power from a fleet of small modular reactors (SMRs) developed by Kairos Power, stating that its first nuclear reactor from Kairos Power is expected to be operational by 2030, with additional reactors coming online by 2035.
As quoted on CNBC, Google emphasized that buying power from multiple SMRs serves as a long-term investment, aimed at speeding up the commercialization of the technology.
Amazon (AMZN – Free Report) also recently announced a $500 million deal with Dominion Energy (D – Free Report) to explore the development of a small modular reactor near Dominion’s North Anna nuclear power station, per CNBC.
High costs and project management have always been areas of concern negatively affecting large nuclear plants, often leading to budget overruns and delays. However, the growing interest in SMRs could address these challenges, driving increased demand for uranium. This could help nuclear plants become smaller, simpler and easier to construct, speeding up the deployment of new plants to meet the rising clean energy demand.
Rising Demand Meets Supply Constraints
The growing supply-demand disparity further fuels the surge in uranium prices. Kazakhstan, the leading uranium producer globally, accounting for approximately 45% of global production, recently announced a 17% cut in its forecasted production for 2025.
This comes on top of the existing challenges faced by other major uranium producers, further intensifying supply concerns in the market and indicating supply challenges, per Trade Brains.
Unlike other energy sources, uranium prices have a minimal effect on the overall cost of nuclear power generation, highlighting the inelastic nature of the metal’s pricing. This could result in sustained higher prices without dampening demand, supporting the upward price trajectory of the metal.
