Why is there a sudden interest in nuclear energy?
The spike in attention on nuclear energy and nuclear fusion stocks comes from a recent scientific breakthrough that could change the way the energy sector at large functions in the future.
In December 2022, scientists at Lawrence Livermore National Laboratory managed to reproduce the power of the sun in a laboratory environment – and crucially, produced more energy than was used to create the reaction.
Scientists have been attempting to harness the power of nuclear fusion since the 1960s, but until the breakthrough in December, it didn’t seem likely it would be able to be monetized efficiently. So now, it’s likely we’ll see nuclear fusion move into the foreground.
And given the recent trouble in the energy sector – with oil and gas becoming increasingly expensive – governments and energy companies have been looking to increase investments in alternative sources of fuel in general.
It’s estimated that global investment in the low-carbon energy transition totaled $1.1 trillion in 2022 – according to Bloomberg – and this is expected to hit $4 trillion within this decade given the transition toward renewables is speeding up. Although a lot of focus is still on solar, wind and hydroelectric power, nuclear fusion investment is growing significantly too.
But what exactly does the industry do? And what are the best ways to get exposure to scientific breakthroughs?
What is nuclear fusion?
Nuclear fusion is the process by which two light atomic nuclei combine to form a single heavier one. The outcome of which is the release of massive amounts of energy.
Nuclear fusion doesn’t use any fossil fuels or produce the harmful gases or waste associated with them, so it is considered a sustainable energy source. Unlike other forms of renewable energy though, nuclear power doesn’t rely on weather conditions. This has made it seem like a more stable alternative to the likes of solar, wind and hydroelectricity.
The process of nuclear fusion uses hydrogen, which is extracted – at a relatively low cost – from seawater and lithium. This is why nuclear fusion is likely to be regarded as one of the best renewable sources of energy, not only does it produce large amounts of energy, but supplies of hydrogen will be around for millions of years.
What do nuclear fusion companies do?
Nuclear fusion companies are the firms involved in the research, development, and creation of nuclear fusion power. It’s estimated that only 33 companies are actively involved in the industry – and none of them are publicly funded.
Privately-funded research companies received about $5 billion from venture capitalists in 2022 alone – including large names like Bill Gates and Jeff Bezos, as well as companies like Google and Tencent.
According to the Global Fusion Industry in 2022 report there are 7 nuclear fusion companies that have received over $200 million in investment to date:
- Commonwealth Fusion Systems ($2 billion+) – aims to develop the fastest, lowest-cost path to commercial fusion energy by building small, low-cost power plants
- TAE Technologies ($1 billion+) – is aiming to develop cost-effective, commercial fusion, as well as storage solutions, electric mobility, and life science research
- Helion Energy ($577 million) – is developing a pulsed non-ignition fusion technology
- General Fusion ($300 million+) – is developing a plan to deliver economical carbon-free fusion energy by the early 2030s
- ENN ($200 million) – aims to deliver commercial fusion electricity and heat to customers
- Tokamak Energy ($250 million) – is developing its own fusion technology based on high-temperature superconductor (HTS) magnets and has been tested at CERN
- Zap Energy ($200 million) – is building low-cost, compact, scalable fusion reactors with no magnets
What are nuclear fusion stocks?
Nuclear fusion stocks are publicly tradable shares of companies involved in the industry.
As most nuclear fusion companies are private – and their shares are not sold on open markets – the only way to trade nuclear fusion start-ups is by buying and selling the shares of their investors.
For example, both Chevron and Alphabet are considered nuclear stocks because they invested in TAE Technologies.
But it’s not just pure-play energy stocks and their investors that will benefit from scientific breakthroughs, there’s a greater picture to be considered. Other nuclear stocks include:
- Businesses involved in sourcing the materials: nuclear power involves the use of various materials such as uranium, plutonium, deuterium, and lithium. So, looking at metal miners and lithium producers – such as Albemarle – can be a good way to get indirect exposure
- Businesses involved in construction and engineering: nuclear fusion reactors are extremely expensive and need a lot of upkeep. Engineering firms, such as Babcock International, could benefit from the contracts to manufacture and manage the maintenance of fusion technology
- Businesses that benefit from the technology: nuclear fusion has the potential to streamline the way a lot of different industries operate. The sectors expected to be early adopters of the technology are data centers – such as Amazon – and plant-based food manufacturers, such as Kellogg’s
Best nuclear fusion stocks to watch
There’s still some way until nuclear fusion technology is widely commercialized but here are some of the stocks that are worth watching for any nuclear power enthusiast.
It’s important to note that for a lot of these companies, breakthroughs and challenges in the nuclear fusion industry are not going to be the only factors that impact their share price. This makes it important to do thorough research before you enter any position – whether that’s a long or short trade.
Chevron (CXV) is one of the world’s largest energy companies. It’s primarily involved in oil and gas exploration and refining but has also been active in investing in clean energy.
Chevron Technology Ventures is the company’s investment fund that focuses on low-carbon energy resources. The fund has investments in Zap Energy and TAE Technologies which gives it exposure to nuclear energy.
When we say Alphabet (GOOG), everyone’s mind automatically goes to Google, but the parent company has a huge number of investments in different sectors – including nuclear fusion.
Alphabet has also invested in TAE Technologies during its latest funding round. And the company is working with the fusion start-up Tri Alpha Energy to create an ‘optometrist algorithm’ – a machine-learning tool that aids in nuclear fusion experiments. The tool is expected to help researchers hold nuclear plasma for longer periods of time.
Albemarle is the world’s largest lithium producer – it also produces refining solutions and chemistry services for pharma companies. Albemarle is expected to pump out 130,000 to 140,000 tons of lithium carbonate equivalent this year from its assets in Chile, the US and Australia.
As lithium is central to the fusion process, when nuclear power is commercialized, huge amounts of lithium will be needed. So, as a key supplier of lithium, the increased demand from nuclear fusion could be highly beneficial for Albemarle.
Babcock International (BCKIF) is an international defense company, which also specializes in nuclear engineering services for both defense and civil solutions.
Over the years, Babcock has made a number of acquisitions to boost its dominance in nuclear engineering, including buying the UK Atomic Energy Authority in 2009.
Babcock also manages compliance for enriched uranium provider URENCO UK Ltd and is involved in fire training for nuclear sites across the UK.
Amazon (AMZN) is most well-known for its mammoth e-commerce empire, but Amazon Web Services – its data arm – is responsible for 16% of Amazon’s revenue.
David Kirtley – CEO of Helion – anticipates that data centers will be one of the largest beneficiaries given they require huge amounts of power. So, nuclear fusion would be a cost-efficient way to cut expenses and boost the AWS business segment. Therefore, it’s unsurprising that analysts have Amazon down to be one of the first takers when it comes to nuclear fusion technology.
Aside from the data center angle, Amazon is a tech company at its core, so it’s not a shock that Jeff Bezos is one of the largest individual investors named in the Global Fusion Industry in 2022 report.
Learn about Amazon’s acquisition history
Plant-based food companies have had a rocky couple of years. Although they should be incredibly popular given the boom in veganism and plant-based eating, investment in these green stocks has been falling. Just look at the share prices of Oatly and Beyond Meat.
The main reason being that it’s incredibly difficult to deliver plant-based food – given the large amount of energy and water needed to produce it – on any meaningful economy of scale. That’s why the products are considerably more expensive than their meat-based counterparts.
Kellogg’s isn’t a pure-play plant-based food producer, so it’s less impacted by the downturn in vegan stocks, but its MorningStar Farm brand faces the same issues.
Nuclear fusion could change this, as the energy could create efficiencies across the supply chain – especially given its ability to foster volumes of potable (safe) water.