Uranium mining stocks surged higher on Wednesday, with industry bellwether Cameco (NYSE: CCJ) rising 8.2% through 2:11 p.m. ET, Denison Mines (NYSEMKT: DNN) doing even higher with a 14.7% gain, and smaller Energy Fuels (NYSEMKT: UUUU) performing better of all — up 17%.
Investors are betting on a resurgence in demand for nuclear energy, and their optimism just isn’t without reason as tech giants like Microsoft (NASDAQ: MSFT), Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), and Amazon.com (NASDAQ: AMZN) are placing multibillion-dollar bets on the sector.
What is going on on with nuclear power?
Last month, Microsoft ignited the rally in nuclear stocks when it signed an influence purchase agreement with Constellation Energy (NASDAQ: CEG) under which the latter will reopen Unit 1 of its Three Mile Island nuclear power plant. Microsoft needs extra power to run the servers at its Azure business unit, and thinks nuclear is likely to be the most effective option to produce that power in a carbon-free way.
Momentum within the sector picked up this week with announcements from first Alphabet after which Amazon that they, too, want to nuclear energy to power their data centers.
Alphabet’s Google business is partnering with privately held Kairos Power to open a series of small modular nuclear reactors (SMRs). Totaling only 500 megawatts (MW) in power production capability, the Google news is barely half as big as Microsoft’s. (Full-scale nuclear power plants generally generate power within the gigawatt range). But that is not why the Google news is important. It’s backing a wholly latest form of nuclear power plants — SMRs, that are expected to be each cheaper and faster to construct than traditional plants.
In theory, that would drive demand for nuclear energy — and for uranium to fuel it — faster than simply constructing more gigawatt-scale power plants would do. It’s this prospect that lies behind the strong interest in uranium producer stocks Wednesday.
Enthusiasm only grew greater Wednesday morning when Amazon announced plans to partner with Energy Northwest, Dominion Energy (NYSE: D), and privately held X-energy to construct 4 SMRs within the state of Washington and at the very least one in Virginia. Combined, these projects promise to bring at the very least 620 megawatts of nuclear power online — and potentially greater than 1 gigawatt, similar to a full-scale nuclear power plant.
Must you buy uranium stocks now?
But do you have to be buying uranium stocks in the course of a uranium stock-buying frenzy? While I’m bullish on the prospects for the nuclear power industry typically and am finding validation for that bullishness in all this recent news, I still think the reply to this query is … perhaps, but tread rigorously and watch the valuations.
With a market cap of lower than $2 billion even after this latest share price surge, Denison Mines is arguably the most affordable of those three stocks, trading at “only” 47 times trailing earnings. Denison also has no debt on its balance sheet, and $93 million in money — which is sweet news, because it is going to need it. It’s currently burning money at the speed of $28 million a yr, and is not expected to show free money flow positive until 2028, in response to the analysts who follow it.
Cameco is a horse of a distinct color. Valued at greater than $24 billion currently, it is well the most precious stock on this sector. Then again, it trades at a staggering 129 times trailing earnings. Cameco is each profitable and free money flow positive, and analysts expect its profits to roughly triple over the following five years. Still, with a valuation that is 27.5 times its forecast earnings in 2028, it’s hard to call the stock low-cost.
And Energy Fuels? With a $1.3 billion market cap, Energy Fuels is barely slightly cheaper than Denison. Analysts hope Energy Fuels turns profitable next yr, and begins generating free money flow in 2027. It’s unprofitable today, nevertheless, and in its 25-year history, it has never generated positive free money flow.
While Energy Fuels stock looks speculative to me, it possesses money reserves that needs to be sufficient to last until its free money flow turns positive. In a momentum-driven market where none of those stocks looks low-cost by the normal valuation metrics of price to earnings, or price to free money flow, tiny Energy Fuels might become the most effective performer of all.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Idiot’s board of directors. Wealthy Smith has no position in any of the stocks mentioned. The Motley Idiot has positions in and recommends Alphabet, Constellation Energy, and Microsoft. The Motley Idiot recommends Cameco and recommends the next options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure policy.
Why Cameco, Denison Mines, and Energy Fuels Stocks All Popped on Wednesday was originally published by The Motley Idiot