Microsoft's Three Mile Island agreement with Constellation Energy has put the nuclear energy demand boom "right out in the open," directly igniting a surge in nuclear energy stocks and uranium mining stocks.
Previously, on Friday, September 20th, Microsoft signed a 20-year power purchase agreement with Constellation Energy— the Three Mile Island agreement— due to Microsoft's need for a large amount of clean energy to meet the power demands of its artificial intelligence data centers. This could encourage the optimization and expansion of the nuclear energy supply chain, including uranium mining, nuclear fuel processing, nuclear reactor construction, and maintenance.
This agreement has shown the market the enormous potential of clean energy demand, that is, as data centers and other large energy consumers increase their power demands, nuclear energy, as a stable and low-carbon energy choice, may continue to grow in demand.
After the agreement was announced on Friday, September 20th, nuclear energy stocks surged. Constellation Energy's stock price closed up 22.29% that day, setting a record for the largest single-day increase in history. Other stocks in the same industry also rose, with another nuclear energy company, Vistra, seeing its stock price surge 16.60% that day. As of today, it still leads the S&P 500 index, and as of Wednesday's close, it has accumulated a gain of over 209% this year, even surpassing Nvidia's 149.4% increase.
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Uranium mining stocks have also successfully reversed their downward trend for the year. Before Microsoft reached the nuclear agreement, the stock price of Cameco, the largest uranium producer in North America, fell throughout the year. After the agreement was reached and as of Wednesday's close, the stock has accumulated a gain of over 10.4% this year, with a gain of about 91% in 2023. Another uranium producer, Denison Mines, has also erased all its losses for the year and has accumulated a gain of over 6.2%.
Global X Research Analyst Kenny Zhu emphasized in a telephone interview:
"A year ago, the power consumption revolution related to artificial intelligence had not even emerged. Microsoft and Three Mile Island's 'recognition' helps investors correctly view the potential upside in this field."
Currently, investors are closely watching for the next round of possible trading opportunities. In addition to stocks that have already surged, Wall Street analysts believe that other U.S. utility stocks have room for growth. Guggenheim analyst Shahriar Pourreza once predicted:
"We believe there will be a large number of data center capitals in the United States. Utility companies such as Ameren Corp., American Electric Power, Duke Energy, Entergy, Evergy, Exelon, and FirstEnergy are 'reasonably valued relative to their potential upside.'"
Analysts believe that the stock prices of uranium miners will continue to rise, and the growth in uranium demand may further accelerate. Data shows that in recent years, the annual growth rate of uranium demand has been about 4%, higher than the 1% for most of the period from 2010 to 2020. KeyBanc analyst Sophie Karp wrote that Microsoft's power purchase agreement "has become an important catalyst to showcase the value of nuclear power generation in the age of artificial intelligence." She stated that this momentum in the utility sector can continue.Michael Alkin, Chief Investment Officer at Sachem Cove Partners, forecasts that the demand for uranium could further accelerate due to the increasing power requirements of data centers and artificial intelligence technologies, as well as the recommissioning of some idled nuclear power plants. Analyst Zhu from Global X suggests that uranium miners may benefit in the long term as these utility companies purchase nuclear fuel.