Global X, an investment management company that specialises in the creation and distribution of ETFs, launched one of the first ETFs with exposure to nuclear and uranium. Richard Siaw, its director for Asia, says that after more than a decade of hesitation following the Fukushima incident, nuclear energy has made a remarkable comeback recently, although it is relatively unknown to the wider public. Three factors underpin the return of nuclear energy: energy security, technological advancements and decarbonisation goals.
Energy security refers to the rise of AI and cloud computing, which is reshaping global power dynamics. Data centres, the backbone of AI applications, are among the most energy-intensive facilities in existence. The International Energy Agency (IEA) expects data centres to consume around 945TWh of electricity per year by 2030, roughly the entire annual energy use of Japan.
As energy demand increases rapidly, the world is also looking to meet its net-zero target by 2050. How can it achieve both objectives simultaneously?
Siaw says nuclear energy is expected to be a solution, which explains why technology companies that offer large-scale cloud services to the markets — Microsoft, Google and Meta — are exploring nuclear partnerships and small modular reactor (SMR) deployments near their data centres, as well as securing long-dated power purchase agreements with utility companies. The deployment of SMR leads to his next point, which is technological advancements and decarbonisation goals.
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SMR, an advanced nuclear reactor, has gained global attention as it is much smaller than traditional nuclear power plants and, therefore, cheaper and faster to construct, and more scalable than its traditional peers.
SMRs are a game-changer for the nuclear energy industry. Newer designs target 30% to 40% cost reduction and can cut deployment time in half. They also come with passive safety systems, AI solutions and predictive analytics to enhance monitoring, reduce downtime and prevent risks, says Siaw.
Simply put, passive safety systems rely on natural forces, such as circulation of water and gas, gravity, convection and conduction to keep the core of the nuclear reactor cool. Even when the power supply is cut off, such as during the Fukushima incident, an SMR can theoretically cool itself down with the passive systems. It is also easier to manage due to its simpler design and lower power output.
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“Modern nuclear [power plants] look very different from their 20th-century predecessors. Together, these shifts are transforming nuclear energy into a credible, scalable and safer solution for the clean energy transition,” Siaw explains.
“Nuclear power also offers stable, storable and domestically managed energy. Unlike wind or solar, it delivers 24/7 baseload power, making it indispensable for countries chasing net-zero targets. It is reliable with zero carbon footprint.”
Private markets and governments around the world are pushing for the expansion of nuclear power plants and energy.
According to the IEA, annual global nuclear energy investments have risen to about US$65 billion ($984.8 billion) per year in recent years, and it is projected to rise to US$70 billion per year by 2030. Some US$1.5 billion in venture capital has flowed into next-generation technologies, such as SMRs, microreactors and advanced fuels, and more than 40 countries are now backing the expansion of nuclear energy, says Siaw.
He says the US administration issued a package of executive actions in May to accelerate the licensing of nuclear reactors, reform the Nuclear Regulatory Commission and target a substantial building out of nuclear capacity.
N K Tong, group managing director of Bukit Kiara Properties and a proponent and investor of nuclear energy, agrees. He is also a council member of Climate Governance Malaysia, the Malaysian chapter of the World Economic Forum’s Climate Governance Initiative, and is certified in sustainability and climate risk by the Global Association of Risk Professionals.
He points out that as early as 2020, China announced its plan to build 150 new nuclear reactors over the next 15 years, which was reported to cost as much as US$440 billion.
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As for Japan, which shut down all 54 of its commercial nuclear power plants after the Fukushima incident, it is restarting some of those plants, according to news reports.
On the home front, the Ministry of Energy Transition and Water Transformation (Petra) announced in early August the launch of a feasibility study on the use of nuclear energy. MyPOWER Corporation, a special-purpose agency under Petra, was responsible for coordinating the preparation efforts based on guidelines recommended by the International Atomic Energy Agency (IAEA).
Like Siaw, Tong believes that nuclear energy is the cleanest, greenest and most affordable energy in the world if it is managed well. He says the world largely depends on crude oil for power and it is not reinvesting enough to replace the depleting reserves, while the amount of energy it consumes is increasing staggeringly with AI and data centres.
The world is pushing for renewable energy, mainly solar power, touted by some as not just the cleanest, but also the cheapest source of energy. But Tong disagrees. He says some of these calculations don’t include other costs, such as the use of reserve energy generated by coal and natural gas during periods without sunshine and all the plants and equipment that come with them.
“When the sun is shining, solar is the cheapest. But when it stops, and you switch to gas plants, the cost of burning gas and the amortisation of the equipment are not accounted for,” he points out.
Nuclear energy should be the cheapest and cleanest form of energy with technological advancements and good management. For instance, there are approximately 440 nuclear plants globally that supply roughly 10% of the world’s electricity today. It has low carbon emissions, is highly reliable and requires minimal land use, says Tong.
Investment exposure to nuclear energy
Sharing his personal experience, not investment advice, Tong says he prefers investment exposure to nuclear energy via commodities, partly through investment vehicles that purchase and store uranium oxide concentrates (or yellow cake) processed from raw uranium ore. It is an intermediate product in the nuclear fuel cycle. He prefers commodity exposure as raw material prices are tied to supply-and-demand dynamics and does not involve technical and specialised knowledge on the designs of nuclear power plants.
While uranium prices are rather high historically, Tong expects these to trend higher in the coming years as the world needs a lot more energy moving forward and governments are building more nuclear power plants.
Even at present, based on his research, the world currently consumes about 190 million pounds of uranium, but only 150 million pounds are being dug out from the ground per year, creating a deficit in the supply of uranium. Adding to the deficit are brownfield restart projects, which involve the restarting or redevelopment of existing nuclear sites currently underway.
The key risk is market volatility, as it involves speculation. For instance, Paladin Energy, a global uranium producer listed on the Australian Securities Exchange, saw its share price rise 294% to A$16.54 in May 2024 from A$4.20 in August 2021. But it fell back to A$4.55 ($3.84) in April this year and was trading at A$8.40 as at Nov 7.
New York Stock Exchange-listed NuScale Power Corp, which develops and commercialises proprietary SMR technology and has gained investor attention recently, has seen big swings in its share price.
People should take note that uranium prices are opaque, as they are not traded on the open market like other commodities. In general, there are two types of prices for reference: the spot price and the long-term contract price.
Tong explains that more than 80% of uranium is traded through long-term contracts, the buyers of which comprise utilities and mining and chemical companies. Those contracts are negotiated privately and only certain details are released periodically.
According to Cameco, one of the largest providers of uranium fuel globally, both the spot price and long-term contract price of uranium had appreciated substantially over the past five years as at Oct 31. The spot price had increased 169% to US$80 per pound while the long-term contract price had risen 142.85% to US$85 per pound.
In terms of instruments, Tong prefers the Sprott Physical Uranium Trust Fund (U.U), a Canadian-based closed-end investment trust listed on the Toronto Stock Exchange. He prefers U.U as it is a physical trust that uses investors’ money to buy uranium oxide concentrates and stores them in one of the three licensed storage facilities in the world.
“When you’re buying the shares of the trust at a discount, you’re buying it from someone else selling at that price. But when the share price goes above its net asset value, let’s say, at 1%, the trust will issue new shares, take the money and buy stocks from the market and store it. It is known as the ‘at-the-market’ equity programme. And the uranium pile keeps getting bigger,” he says.
There is also Yellow Cake plc listed on the London Stock Exchange that provides investors with direct exposure to the uranium market via physical holdings of uranium oxide concentrates. The company issues publicly quoted shares to investors and uses the proceeds to acquire uranium before storing it. Yellow Cake isn’t a mining operator and positions itself as a “pure play” vehicle on uranium prices, according to online information.
There are various ETFs in the market, including those listed on US stock exchanges that are easily accessible to local investors. But Tong prefers exposure through commodities rather than companies, as the latter may be involved in the design and technological development of nuclear power plants, which requires specialised knowledge to understand their viability and potential.
Nevertheless, he says an ETF is a good way to access the nuclear market because of its diversification. He adds that he never shorts the nuclear market as prices can be highly volatile — at times comparable to digital assets like Bitcoin — partly due to speculation.
For ETF investors, the Global X Uranium ETF (URA) is one such product that provides investors with exposure to the nuclear sector. As at October, the URA ETF had given investors a return of 105% year to date, with a standard deviation of 34%, given the narrow exposure to 49 nuclear- and uranium-related companies on the index, says Siaw.
Digital broker Moomoo says its top five holdings are Cameco Corp (21.84%), Oklo Inc (13.16%), U.U (5.75%), Uranium Energy Corp (5.64%) and NexGen Energy (4.65%). According to online information, Oklo develops and commercialises advanced fission power plants, specifically SMRs, to provide clean, reliable and affordable energy; Uranium Energy engages in the exploration, extraction and processing of uranium; and NexGen Energy is a uranium exploration and development company.
“The Global X Uranium ETF gives investors a way to participate in this transition by tracking the Solactive Global Uranium & Nuclear Components Total Return Index, balancing exposure between established miners, fuel suppliers and next generation technology innovators,” says Siaw.
He says all companies in the URA must pass a controversial weapons filter to ensure they do not engage in any application of uranium for unintended or controversial purposes.
From an investment standpoint, Siaw says nuclear energy has evolved from a cyclical commodity play into a structural growth story with multi-decade growth opportunities unfolding. Institutional investors, including pension funds, sovereign wealth funds and infrastructure firms, are increasingly viewing nuclear power as a stable, long-term asset that complements renewables, he adds.
“In the short to medium term, uranium demand will stay strong as reactors restart and new projects come online globally. The first wave of commercial SMRs is expected within this decade, and that could redefine how energy is produced and consumed globally,” says Siaw.
“Looking beyond, nuclear energy is poised to become a core pillar of the world’s clean energy mix. We expect deeper integration with renewables, driven by increasing power demand from technological convergence.”
Key risks of investing in nuclear and uranium
Richard Siaw, director for Asia at Global X, an ETF provider, elaborates on the risks of investing in the nuclear and uranium markets.
There are policy and regulatory risks as government changes can abruptly alter the economics of nuclear projects, as well as execution risks, since such projects have historically suffered large cost overruns and schedule delays. While small modular reactors (SMRs) aim to mitigate these issues, the risks are not eliminated.
Investors should be aware of price volatility, as uranium prices and the earnings of uranium miners can be highly cyclical.
As the holdings of many nuclear and uranium ETFs are concentrated in a relatively small set of producers and service companies, idiosyncratic events can therefore have outsized effects on their performance, which means concentration risk, says Siaw.
There is also technology and obsolescence risk, where some advanced reactor concepts may not reach commercial viability or may be outcompeted economically by another firm’s low carbon solutions, such as hydrogen.
“Perception and reputational risk are also key, as new incidents or negative public sentiment could prompt policy reversals or cause governments to impose tougher rules on the sector,” he says.
For N K Tong, a proponent of nuclear energy, another Fukushima incident would adversely impact the nuclear market.
The incident refers to a major nuclear accident that happened on March 11, 2011, at the Fukushima Daiichi Nuclear Power Plant in Japan, triggered by a massive earthquake and subsequent tsunami.
The natural disaster disabled the power and cooling of three reactors, causing their cores to melt, releasing a significant number of radioactive materials into the environment.
