Artificial Intelligence has a problem that even it can’t solve on its own.
We’ve all heard about the wonders of AI.
The problems it can solve, the diseases it may be able to cure.
The productivity that it will increase and of course the money it will make for everyone.
But there’s a growing problem.
AI needs energy and it needs a lot!
It’s kind of ironic, we’ve been working to reduce the energy needed around the world and then along comes something that increases demand and suddenly, we’re looking for ways to generate copious amounts of new “clean” energy.
If you ask ChatGPT you’ll get a little walkaround for an answer with a short plug on how OpenAI is trying to find environmental solutions.
According to the Wall Street Journal and other sources, the amount of power that AI is consuming amounts to that of three cities the size of New York City and growing.
Last week we saw the rumblings and speculation that have been going on in the market come to a head when it was announced that Microsoft (MSFT) was partnering with Constellation Energy (CEG) to provide dedicated power to Microsoft’s data centers.
The announcement wasn’t the surprise, the way the power would be provided was.
The new partnership seeks to open one facility at the Three Mile Island nuclear facility to provide that dedicated power.
This isn’t the first time we’ve seen AI look for solutions using nuclear power.
Several companies are working with names like American Electric Power (AEP), Duke Energy (DUK), and NextEra Energy (NEE) to provide a solution.
Over the last six months, a few companies have found their way to research desks as alternatives to large nuclear reactor plants.
NuScale Power (SMR) and NANO Nuclear Energy (NNE) are two companies focusing on small modular reactors (SMRs) and microreactors respectively.
NuScale is known for its groundbreaking NuScale Power Module, the first SMR design certified by the U.S. Nuclear Regulatory Commission, which can produce up to 924 MWe of carbon-free energy.
This technology is designed for versatility in replacing retiring coal plants, complementing renewable sources, and supporting desalination processes.
NANO Nuclear Energy specializes in portable microreactor technology with its innovative models like ZEUS and ODIN.
These microreactors are designed for diverse applications including remote residential, commercial, and industrial energy supply.
Last week the company unveiled plans for the potential of space applications through their subsidiary NANO Nuclear Space.
Both companies are aggressively expanding their footprint with strategic partnerships. Both are also in the very early stages of research and deployment to innovate nuclear technology solutions that are smaller, cheaper, and safer, aiming to contribute significantly to a carbon-free future.
The VanEck Uranium and Nuclear ETF (NLR) has been trading since August 2007.
Shares of this ETF aim to replicate the performance of the performance of the MVIS Global Uranium & Nuclear Energy Index. That index tracks companies that are expected to generate at least 50% of their revenue or assets from nuclear energy.
In short, this is a single holding that should track the interest and attention of the nuclear power companies that should be involved with solving the AI energy problem.
The fund’s holdings are composed of utility companies, uranium miners and companies that service the nuclear energy sector.
Top five holdings for the fund, including their one-year performance are in the table below.
Notable is the fact that Cameo Corp. (CCJ), a uranium mining company, is lagging the performance of the utility companies.
Cameo has a higher correlation with the basic materials sector. This is due to its mining operations. As a result, the company has seen additional volatility over the last year as investors suspect a recession could slow demand.
While the ETF is comprised of larger, established companies, smaller developmental companies are part of its portfolio as well.
NuScale (SMR), one of the development companies above, is held by the VanEck Uranium along with other small development companies.
Shares of NANO Nuclear have not made their way into the portfolio as the company has not met the ETF’s holding requirements yet. That said, the number of smaller developing companies held by the ETF should continue to grow in 2025.
Performance of the fund stands at 23% for the last year and 71% for the last two years.
The NLR shares crossed into a long-term bull market trend in November 2020 and have remains in that trend since.
From May through August, the NLR saw a “healthy correction” of 20% as the shares dropped from their highs near $90 to lows in August of $68.42.
Following that correction, the NLR shares have posted a “double bottom” pattern at those lows and recently shifted back into a short-term bullish trend.
The ETF’s 50-day moving average turned bullish last week, indicating that the short-term momentum is growing more positive.
From here, the ETF is likely to see a little selling that should serve as an opportunity to buy the dip on the new headline driven bullish trend. Watch for support at $80 as a signal that the short-term selling has concluded.
This is not the Nasdaq 100 ETF (QQQ) or the S&P 500 ETF (SPY), but instead a lower volume trading ETF in an area of the market that is developing. As such, daily volatility is higher than normal and investors whould note that before buying.
Long-term trends that look out to the horizon and the development of nuclear energy as a solution to the AI energy drain should be the driver for any investor’s interest in the VanEck Uranium and Nuclear ETF (NLR).
