Did Big Tech Just Start a Nuclear Revival?

In what seems like a major shift for the energy sector, big tech companies like Google parent Alphabet (NASDAQ: GOOGL), Amazon (NASDAQ: AMZN), and Oracle (NYSE: ORCL) are leading the charge in reviving nuclear energy with investments in Small Modular Reactors (SMRs). 

Google recently made headlines by signing a deal to purchase six or seven SMRs from California-based Kairos Power to help power their AI datacenters. This follows on the heels of Microsoft's (NASDAQ: MSFT) agreement to draw power from the long-dormant Three Mile Island nuclear plant, and Amazon’s announcement of a partnership with Energy Northwest to develop new SMRs.

This push toward nuclear energy reflects the growing need for a reliable, clean energy source to power the explosive rise in AI and cloud computing, which are still highly energy-intensive. As renewable energy sources like solar and wind face reliability challenges, nuclear offers a round-the-clock, carbon-free solution, especially as data centers consume more power. 

With tech giants leading the way, this could mark the start of a nuclear renaissance.

The question is … How can investors play this trend? 

SMRs are one option. They’re a new type of nuclear reactor designed to be smaller and more flexible than traditional large-scale reactors. Unlike conventional nuclear plants, which can take years and billions of dollars to build, SMRs are factory-built in smaller units and transported to their location. This approach allows for faster and cheaper construction.

One company at the center of this revolution is Nuscale Power Corp (NYSE: SMR), which is developing advanced SMR technology. While it offers a direct play on the future of nuclear, its unprofitability makes it a more speculative bet.

That said, you have to respect the technical strength out of SMR recently, which effortlessly broke through its previous all-time highs (blue):

Uranium miners are another way to play the trend … as they provide the fuel for nuclear reactors. However, top miners like NexGen (NYSE: NXE) and Cameco (NYSE: CCJ) are already inching back toward all-time highs.  

As an alternative, we’re keeping an eye on Uranium Royalty Corp (NASDAQ: UROY). UROY operates with a royalty model, which is attractive compared to the capital-heavy mining stocks. Rather than bearing the full cost of production, UROY collects royalties from the uranium miners, providing exposure to uranium's rise without the direct risks of mining. 

This model has helped UROY stand out, and it’s currently screening well based on our models. It’s not necessarily cheap, but the strong financials and forecast may make up for that:

• UROY ($2.64) is not significantly undervalued (75.88%) relative to our estimate of its Fair Value price of $1.50 based on Discounted Cash Flow (DCF) modeling, when including a healthy margin of safety
• UROY's profit margin has increased (+56.4%) in the last year from (-32%) to (24.4%)
• UROY's revenue is forecast to grow at an exceptional rate of 20.47% per year

Unlike the big uranium miners, UROY is still over 50% off its all-time highs in 2022 and looks like it may try to push past its resistance (blue) soon:

Only two analysts we track have rated the stock, but both have price targets much higher from here:

Click here to see UROY price forecasts.

Bottom line? Given the momentum behind SMRs and the potential long-term demand for uranium, UROY could be a more stable way to capitalize on the nuclear revival led by big tech.

Click here to see UROY fundamentals.

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