Nuclear Energy: Opportunities and Risks

After years of being on the sidelines, Uranium and Nuclear topic came back into the consciousness of the investment public in 2021, first in form of speculative interest in Uranium and Uranium miners and shortly thereafter in Nuclear-relevant companies as well, ignited by the energy security concerns in the wake of war in Ukraine.

Nothing illustrates as much as the development in the Uranium prices. While the headlines tend to put emphasis on much more volatile and speculative spot market, major utilities and miners mostly tend to sign contracts 2-3 years in advance, arguably making the long-term price a better gauge of the sentiment around the nuclear industry.

Source: Cameco, UxC. Past performance is not indicative of future returns.

Although spot prices went through significant ups and downs throughout the last few years, long-term Uranium prices steadily rose. Throughout the last 12 months the long-term price remained consistently stable at ~$80 lb despite downward pressure on the spot market, indirectly supporting the long-term Nuclear thesis.

So what is it that is driving renewed investor interest?

Energy Security

In the winter season of 2025, Germany, reliant on Solar and Wind for its low-carbon energy generation, experienced an unusual period of low wind and little sunlight. This caused an electricity deficit, which had to be plugged by burning more fossil fuels and energy imports from the European neighbors. The latter, in turn, caused electricity prices to spike in the Nordics, resulting in political unrest in Norway and reprimands from other Scandinavian governments¹.

Source: Entso-E, EPEX.

This highlighted a need for a low-carbon baseload solution to provide energy in such situations. Nuclear’s excellent >90% capacity factor makes it an appropriate candidate for this role. However, in certain cases, especially when it comes to older designs, it could happen that the plant’s ability to operate could be disrupted by extreme heat² which highlights the importance of choosing appropriate technologies in the context of climate change.

Source: IEA, 2023. The capacity factor represents the ratio of actual electrical energy output over a given period of time to the theoretical maximum electrical energy output over that period.

Cost predictability is indeed another crucial factor: while about 80 percent of operating costs for gas-fired plants depend on gas prices, uranium prices account for only about 25 percent of nuclear power plant costs³. This means that even if uranium prices rise, their impact on the end consumers would be limited. In contrast, volatile gas prices have often caused rapid and noticeable price spikes for European consumers, especially during winters.

Decarbonization

Nuclear energy has one of the lowest carbon footprints among conventional energy sources, thanks to its ability to produce energy without combustion. This makes it a great candidate for the backbone of a low-carbon grid, complementing solar, wind and hydro.

Source: Our World in Data, 2023.

Nowhere in the world is the decarbonization push more prominent than in China, where most of electricity is still coming from coal⁴. In an effort to decarbonize the industrially-driven economy and clean up the air in major cities, the Chinese government actively invested in low-carbon energy sources, including Nuclear, and managed to lower the share of coal-derived electricity supply from 80% to 60% within 15 years. There are currently 33 additional nuclear reactors under construction in China that would add more than 35 GWe of low-carbon power to the country’s grid⁵. Investors should nonetheless be aware of risks of investing in Emerging Market issuers and special risk considerations of investing in Chinese companies.

AI and Data Centers

In the last years, demand for data center capacity increased, driven by increased adoption of cloud solutions and emergence of Large Language AI models, driving electricity consumption. While data centers have become much more efficient in recent years, consuming less energy per unit of computation, this efficiency improvement has recently slowed down. Nuclear power provides a stable and reliable electricity supply, making sure data centers can be powered 24/7. At the same time, IT giants want to reduce their carbon footprint and do not want to rely solely on gas/coal-fired power plants to grow their energy supply. The trend was kicked off in September 2024 by Microsoft, which signed a 20-year power purchase agreement with Constellation Energy at the previously dormant Three Mile Island facility in Pennsylvania⁶ and followed by the likes of Alphabet, Meta and Amazon⁷.

Regulatory Tailwinds

The change of sentiment in the most obvious in the US, where President Trump signed four Executive Orders to emphasize domestic nuclear energy production, resilient supply chains and technological innovation. In Europe the debate around nuclear power has also moved significantly — especially in light of rising energy prices, geopolitical uncertainty, and the growing need for secure, low-carbon baseload power. Even in Germany, traditionally very skeptical of nuclear, polls indicate that the majority of public are in favor of returning to nuclear⁸ and the new government indicated that they will be dropping the longstanding feud with France over the issue⁹.

Interest in nuclear energy first experienced revival as European countries rushed to extend the lifecycle of existing plants with the start of the war in Ukraine, which raised questions about European energy security. Now, several governments are looking to add extra nuclear power to the grid. However, many are still traumatized by the history of cost overruns on legacy projects and are looking for alternative solutions like Small Modular Reactors (SMRs). Their modular design allows serial factory production, in theory reducing planning, construction time, and costs. Additionally, SMRs can be scaled according to demand: multiple modules can be combined or added incrementally. While the technology is not yet commercialized, it is well advanced: first prototypes are operational, and some countries have ambitious deployment plans. However, large-scale commercial rollout is still years away and it remains to be seen if their economics work out.

How to invest in Nuclear Energy?

Just as nuclear energy is undergoing a renaissance, investor interest has surged. Those willing to in the industry may consider the following instruments:

• Mining companies
• Funds or firms that hold physical uranium
• Uranium financing and royalty companies
• Nuclear pure-plays
• Industrial conglomerates with nuclear exposure
• Uranium/Nuclear ETFs

Compared to buying an ETF, investing in individual stocks offers higher upside potential but also greater idiosyncratic risk. Direct investment requires a high degree of specialized knowledge, as some companies are more sensitive to uranium prices than others.

Should you decide to invest via an ETF, VanEck Uranium and Nuclear Technologies UCITS ETF (ISIN: IE000M7V94E1) offers its investors a diversified and liquid access to a broad spectrum of companies that operate across the intricate nuclear value chain. This includes an array of companies that participate in uranium mining or play essential roles in development of nuclear technologies and nuclear plant construction. Please consider the risks such as risks related to natural resources investments, liquidity risks as well as concentration risks before investing. For full information on risks please refer to the KID and the Prospectus.