Are We on the Precipice of a Nuclear Renaissance?

The long nuclear winter may be over. Nations are increasingly looking to use emission-free nuclear energy to balance the intermittent nature of renewable energy sources and meet net-zero ambitions. A recent report from Morgan Stanley noted five key trends suggesting a resurgence in nuclear energy and identifies opportunities for investors to benefit from its renaissance.[1]

Nations Have Pledged to Triple Nuclear Power Capacity by 2050

At the COP28 climate conference, 20 countries, including the US, signed a joint declaration to triple nuclear power capacity by 2050, using 2020 as a baseline. Globally, that would mean an addition of 740 gigawatts (GW) over the current 390 GW.

Nuclear Energy May Solve Artificial Intelligence’s Appetite for Power

Artificial intelligence (AI) requires massive amounts of energy.[2] Morgan Stanley estimates an additional 224 terawatt-hours (TWh) of energy annually will be needed by 2027 to power AI. That is equivalent to the total annual output of a medium-sized country like Spain.

Nuclear energy could help meet the additional power demands of AI. AI data centers are often located in areas with abundant energy resources. Integrating them with nuclear facilities could ensure consistent, uninterrupted power without relying on external grid connections.

Regulation Is Becoming More Favorable to Financing

Nations are implementing policies and regulations that favor nuclear financing. In the U.S., legislation like the Inflation Reduction Act includes outright subsidies for nuclear energy. Meanwhile, the European Union (EU) and China have revised their taxonomies to classify certain nuclear activities, such as nuclear plant construction, as “green” thereby enabling access to favorable financing terms.

Overcoming the Hurdles of Nuclear Facility Construction

It can take 10-15 years to construct a nuclear facility without delays and costs billions of dollars. There are also concerns about an adequate supply of trained individuals to staff the facilities and the availability of the resources, such as uranium, needed to generate nuclear power.

Small Modular Reactors and Nuclear Fusion May be Game-Changers

Traditional nuclear plants are large and expensive to construct. Small nuclear reactors (SMRs) are much smaller and don’t require as much capital and land. They may be appropriate for areas that can’t support a full-scale nuclear plant and are adaptable for regional needs.

Nuclear fusion is the least developed, but probably the most promising technology on the horizon. Fusion replicates the happenings at the core of the sun in which two light nuclei merge to form a heavier one and, in the process, release significant amounts of energy. Nuclear fusion, due to its physics, poses no threat of a reactor meltdown and does not create radioactive waste.

In its current state, it requires more energy than it produces. However, advances are being made to solve this problem.

Ways to Profit from a Potential Nuclear Renaissance

Morgan Stanley estimates there will be $1.5 trillion in capital investment by 2050 to support the expansion of nuclear energy. They highlight four potential ways to capitalize on this expected growth:

• Nuclear power generation
• Uranium mining companies
• Nuclear equipment and plant companies
• Nuclear waste handling

How May Investors Gain Exposure to Companies in the Nuclear Renaissance?

The Range Nuclear Renaissance Index ETF

The Range Nuclear Renaissance Index ETF (NUKZ) seeks to track the performance, before fees and expenses, of the Range Nuclear Renaissance Index. The index aims to track the performance of a portfolio of stocks that are involved in the following segments: Advanced Reactor, Utilities, Construction & Services, and Fuel.

Morgan Stanley’s list of recommended companies includes NUKZ holdings:

• Constellation Energy
• Vistra Corp

For a full list of NUKZ holdings, please click here.

Holdings are subject to change.

[1] Unless otherwise noted, all data sourced from: A Nuclear Renaissance Is Coming, Morgan Stanley, 6/10/24
[2] Please see our blog, The Growth of Artificial Intelligence Will Require More Energy

Risk Disclosures:

Carefully consider the Fund's investment objectives, risk factors, charges and expenses before investing. This and additional information can be found in the Fund's full or summary prospectus, which may be obtained by visiting www.rangeetfs.com/nukz. Read it carefully before investing or sending money.

Investing involves risk, including possible loss of principal. There is no guarantee the Funds will achieve their stated investment objectives.

Investments in the energy industry are subject to significant volatility due to changes in commodity prices. Additional risks include changes in exchange rates, government regulation, world events, economic and political conditions in the countries where energy companies are located or do business, and risks for environmental damage claims.

The Fund is non-diversified. Its concentration in an industry or sector can increase the impact of, and potential losses associated with, the risks from investing in those industries/sectors.

Nuclear companies may be subject to substantial government regulation and contractual fixed pricing, which may increase the cost of doing business and limit the earnings of these companies. A significant portion of revenues of nuclear companies depends on a relatively small number of customers, including governmental entities and utilities. As a result, governmental budget constraints may have a material adverse effect on the stock prices of companies in this sub-industry.

International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from social, economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. Investments in smaller companies typically exhibit higher volatility.

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