3 Uranium Stocks To Gain as Microsoft Goes Nuclear to Power AI

Key Points

• Microsoft plans to power its data centers with clean nuclear energy through a 20-year power purchase agreement with Constellation Energy.
• Constellation Energy will restart a dormant but functional nuclear reactor on Three Mile Island.
• Uranium mining stocks are seeing inflows in anticipation of rising demand for uranium to power nuclear reactors.

Microsoft Co. NASDAQ: MSFT signed a 20-year power purchase agreement with Constellation Energy Co. NASDAQ: CEG. The clean electricity will come from a revived nuclear reactor formerly known as Three Mile Island Unit 1, renamed Crane Clean Energy Center. Constellation plans to invest $1.3 billion to revive the 835 MW nuclear reactor pending permits and authorization from the Nuclear Regulatory Commission. The restart is expected in 2028, and Constellation seeks a license renewal that will extend operations for at least another 26 years.  

While terms of the deal were not disclosed, Constellation Energy has stated that it is the largest power purchase agreement in history. In reaction, Constellation Energy’s stock surged 22.29% on the news. This news rocked the oil/energy sector as uranium stocks also saw a boost in anticipation of the increased demand for uranium. Here are three uranium stocks that may benefit from the deal.  

Cameco: The World’s Largest Publicly Traded Uranium Producer

If you're looking for a pure play on uranium, Cameo Co. NYSE: CCJ is your go-to stock.

Cameco, based in Canada, is the world’s largest publicly traded uranium producer.

Operations are split into two segments: Uranium and Fuel Services.

• Its Uranium segment operates several mines and mills to extract the uranium and produce a uranium concentrate referred to as yellowcake due to its yellow-colored powder appearance. This segment also handles exploration activities to discover new deposits and sales for utilities and customers worldwide.
• Its Fuel Services segment provides value-added services, including converting the yellowcake into UF6 (uranium hexafluoride), the material just before the enrichment stage. Cameco outsources the enrichment process to providers since it doesn't have facilities for this. This segment also manufactures fuel bundles and various other essential components for its nuclear reactor clients.

Cameco also owns a 49% stake in a joint venture developing a laser-based uranium enrichment technology called Global Laser Enrichment. The technology has the potential to provide a more cost-effective, safer, and efficient way to enrich uranium in the future.

Cameco's First Half of 2024 Saw Growth in Its Uranium Segment

The company saw revenues grow 5% for the first six months of 2024 to $1.2 billion. Uranium production rose 61% YoY to 7.1 million pounds. Sales volume rose 13% to 6.2 million pounds. The average realized price was $56.43 per pound. Fuel services saw a 12% YoY decline in volume to 2.9 million kgU and a 21% decline in sales volume.

Long-Term Contracts Call for at Least 29 Million Pounds of Annual Delivery

Cameco expects to deliver 32 million to 34 million pounds of uranium in 2024. As of June 30, 2024, the company had long-term contract commitments requiring delivery of an average of 29 million pounds per year from 2024 through 2028, up one million pounds since March of 2023. Cameco also has contracts spanning decades in its uranium and fuel services segments, many of which can benefit from market-related pricing mechanisms.

Rising Uranium Prices Boost Energy Fuels' Profit Potential

The only conventional uranium mill operating in the United States is operated by Energy Fuels Inc. NYSE: AU.

In addition to uranium, the Colorado-based company also produces and sells rare earth elements, heavy mineral sands, and vanadium pentoxide, which is used in rechargeable batteries and to produce sulfuric acid.

At the Starting Line for Uranium Production

Energy Fuels is not a major producer of uranium just yet. In Q2 2024, they sold 100,000 pounds on the spot market at $85.90 per pound for $8.59 million in proceeds at a 57% profit margin. They expect to produce 150,000 to 500,000 pounds of finished triuranium octoxide (U308) in 2024 from stockpiled alternate feed materials and newly minted ore.

Newly Signed Contract with a U.S. Nuclear Utility

They signed a new long-term sales contract with a U.S. nuclear utility to deliver 270,000 pounds to 330,000 pounds of uranium between 2026 and 2027 and potentially another 180,000 pounds to 220,000 pounds until 2029 under a hybrid pricing formula, subject to floor and ceiling prices that can provide upside from rising uranium prices and protection from inflation. Its large-scale uranium processing campaign at the White Mesa Mill is expected to commence in 2024 and continue until 2026.

Uranium Energy’s Sweetwater Plant Boosts Production Potential

Headquartered in Corpus Cristi, Texas, Uranium Energy Co. NYSEAMERICAN: UEC explores, mines, and processes uranium and titanium concentrates.

The company has the U.S. licensed capacity to produce 8.5 million pounds of uranium. Note the word 'capacity'; they haven’t actually started producing yet.

The company has around $558 million in properties and mineral rights and continues to make acquisitions and equity investments to grow its portfolio.

Acquiring the Wyoming Sweetwater Plant and Uranium Assets From Rio Tinto

The company is still in the exploration stage despite agreeing to purchase Rio Tinto Group’s  NYSE: RIO Sweetwater Plant and Wyoming uranium assets for $175 million. UEC would control 12 uranium projects in the Great Divide Basin of Wyoming. This is the third U.S. hub-and-spoke production platform. The Sweetwater Plant is a 3,000-ton-per-day processing mill with a licensed capacity of 4.1 million pounds per year.

Waiting at the Starting Gate

Uranium Energy has two production-ready ISR hub-and-spoke platforms in Wyoming and South Texas. Both are anchored by fully operational processing plants served by seven fully permitted United States ISR uranium projects. It's a matter of waiting for them actually to start producing.