Uranium stocks are starting to look quite interesting again, as the artificial intelligence (AI) infrastructure continues to call for the energy grid to pick things up. Undoubtedly, with the AI revolution paving the way for small nuclear reactors to go up and, with that, more demand for uranium, it seems like a pretty good idea to consider the nuclear energy names that stand to be considerable downstream AI beneficiaries.
Sure, you could place a big bet on the AI infrastructure plays themselves or even the AI firms actively building large language models (LLMs) and putting the finishing touches on their AI (or should I say superintelligence) research dream teams. But, at the end of the day, it’s not just the well-known AI plays that could be in for a world of growth. Arguably, the more obvious plays in the market are going for a pretty hefty premium.
Source: Getty Images
An AI boom could spark a bigger boom in uranium
Despite concerns over valuation surrounding a handful of AI-driven tech stocks, investors have remained invested in the potential AI winners. There seems to be a lot on the line if firms do race towards achieving artificial general intelligence (AGI) at some point in the next half a decade or so.
At some point, some of the overheated AI stocks will slide. Some will get cut in half, and perhaps a few of those will shed more than half of their value. But, at the same time, there are bound to be huge winners as well, not just at the source of AI innovation but further downstream as well.
As for the uranium miners, many of whom may still have room to run given their opportunity to fuel a revolution, I still think there’s value to be had. Indeed, the uranium miners themselves can be a rather tricky bet, given that uranium prices tend to fluctuate wildly.
And though betting on a commodity or its miner can introduce choppiness, I also think that the long-term trend is a friend of the top names within the space. So, if you’ve got a strong stomach and want to capitalize on the nuclear renaissance driven by AI without paying up too large a premium, perhaps the following investments are worth checking out.
Cameco
Cameco (TSX: CCO) is one of the best uranium mining plays out there. The stock has been on a shocking run over the past six months, soaring close to 110%. Undoubtedly, earlier in the year, when shares were in correction mode, I pounded the table on the miner. And while you can’t turn back time, I think the latest pullback is after the latest 9% dip.
Sure, such a pullback doesn’t mean much, especially considering shares melted up violently just a few weeks ago. And while the valuation is tougher to get behind at 58.2 times forward price to earnings, I think that the high price is worth paying since it’s now a sizeable ($59 billion market cap) operator with tremendous competitive advantages. With huge deals being inked and likely more to come, I think there are drivers to power CCO stock higher, even if the recent bounce in uranium prices were to stall at some point.
Should a uranium shortage cause a spike in uranium prices, there’s no telling how high CCO shares could fly in the next three years, as nuclear reactors seek fuel to power all those AI data centres. As prices pick up traction again, I think Cameco may be a pricey-looking stock that proves cheap.
In any case, if you believe in the AI boom, Cameco and the uranium plays might be the best way to play it, given how critical a role nuclear reactors will play in the era of advanced AI.
