Nuclear power is on the verge of rapid expansion as power demand increases while carbon-intensive energy sources are phased out, and several industrial and utilities stocks stand to benefit.
There are only a handful of names with direct or indirect exposure to nuclear energy. As always, investors should be mindful of valuations, even if the long-term fundamentals for nuclear power are on an upswing.
While criticisms remain, ranging from reactor safety to the unsolved issue of storing spent fuel, the current environment represents a significant sea change for stocks that could benefit from the expansion of nuclear power. “We’ve seen a shift,” says Morningstar senior equity analyst Tancrede Fulop. “With the massive increase in electricity prices since the energy crisis and growth in electricity consumption, especially in the US, fueled by data centers and AI, nuclear is sexy again.”
Can Rolls-Royce Become a Nuclear Champion?
Ben Kumar, head of equity strategy at 7im, says there is no one key European player in nuclear technology, but he is keeping his eyes on aerospace and engineering stock Rolls-Royce RR.
In June, the FTSE 100-listed firm was chosen as the UK government’s preferred bidder to build the country’s first small modular reactors. SMRs, which can mostly be built to a single design on a factory line rather than bespoke for each site, are in theory an easier, cheaper, and quicker option. Part of a government effort to push Britain to the frontier of nuclear energy technology, with plans for a “new golden age of nuclear in the UK,” the company will build the SMRs at Sizewell C in Suffolk.
While the SMR approach is unproven, and no sites are fully operational yet anywhere in the world, Rolls-Royce could be carving a niche in this nascent sector. In 2024, it secured a deal with the Czech state utility ČEZ Group as its preferred supplier for the development and construction of SMRs in the Czech Republic.
“Rolls-Royce could find themselves in a position where they are Europe’s supplier of this technology. If the Czech Republic have signed up, that tells me this is a technology that is regulated or at least allowed to be used in the European Union,” Kumar says.
Kumar argues the market is currently underpricing Rolls-Royce’s nuclear business and overestimating demand for its jet engines. In his view, the second half of the year could see the market realizing the firm’s nuclear capability in its valuation.
However, for Alessandro Dicorrado, portfolio manager of the Ninety-One UK Special Situations Fund, the value of Rolls-Royce’s SMRs is yet to be seen. In 2024, the business generated only £3 million in underlying revenue. “We feel it’s a nice optionality, but in terms of the investment case for Rolls-Royce, its marginal. It is an important technology with lots of applicability, and it’s a nice option for the company,” he says.
Dicorrado argues that all Rolls-Royce needed was government backing to allow it to take the initial risk of developing SMRs. Nonetheless, there is still a question mark over how much profit this business will produce.
Britain’s Centrica as a Nuclear Power Stock Play
Centrica CNA, the UK energy supplier behind British Gas, is another stock that could benefit from the growth of nuclear power in Britain. It is rumored that the company is close to securing a 15% stake in the Sizewell C nuclear project. Fulop is watching Centrica closely, as the stake could make it a significant nuclear player.
Centrica already has a 20% stake in Électricité de France, the French energy giant that owns and runs Britain’s nuclear fleet. This new investment would almost double Centrica’s exposure, and Fulop argues that if EDF’s dominance of UK nuclear continues, Centrica would also benefit from that. EDF was delisted from Euronext Paris in 2023 after the French state acquired a 100% stake.
Centrica’s overall business saw a sharp drop in last year’s pre-tax profits on the back of a “more normalized” energy backdrop, as the company benefited from a period of high energy prices triggered by Russia’s invasion of Ukraine. Its 2024 pretax profit came in at £1.68 billion, a significant fall from the £6.47 billion it reached in 2023. Centrica Nuclear recorded adjusted operating profits of £353 million in 2024, down from £536 million in 2023.
Are Spain’s Iberdrola and Endesa Long-Term Nuclear Opportunities?
Spain’s recent blackout has renewed the debate around overreliance on renewable energy and the role of established power sources like nuclear. On April 28, Spain and Portugal experienced a widespread outage which the Spanish government said stemmed from a combination of “bad planning” and human error.
Spain’s prime minister, Pedro Sanchez, has committed to closing the country’s nuclear reactors by 2035 and switching completely to renewable energy sources. Fulop notes that 20% of the country’s energy comes from five nuclear power plants, with utility giants Iberdrola IBE and Endesa ELE the two dominant players in nuclear power in Spain. Endesa produces 3,686 MW of nuclear energy, representing 47.1% of the total nuclear power generated in the country. Iberdrola Generación Nuclear produces slightly less, at 3,177 MW of nuclear power.
Kumar says both these stocks are ones to watch. “The aim was for Spain to be out of nuclear power by 2035, but all those assumptions are up for challenge. In general, there is no competitive moat bigger than already knowing how to do nuclear power,” he explains.
Which Stocks Provide Direct Exposure to Uranium?
As demand for nuclear power increases, there is a growing risk that Western countries will face shortages of the crucial ingredient for nuclear fuel: uranium.
At the end of June, the spot price for Uranium reached $78.50, a drop from previous highs in June of last year of $84.25.
However, Kumar believes that investing directly in commodities can be “dangerous” for investors. He prefers Canadian uranium miner Cameco CCO, due to its exposure to the raw material. Canada was the world’s leading uranium producer until 2009, when Kazakhstan’s uranium production surged.
One of the largest global providers of uranium fuel, Cameco boosted production in 2024 by around 30% to 37 million pounds. Expansion of its production of uranium at the McArthur River uranium mine could increase extraction of uranium by a further 25 million pounds per year.
Cameco recorded a pretax profit of CAD 133 million in the fourth quarter of 2024, up from CAD 108 million in the third quarter of 2023, benefiting from the higher price of uranium.
In the United Kingdom, FTSE AIM stock Yellow Cake YCA is another name Kumar highlights as a way investors can gain exposure to uranium. “Yellow Cake is just a holding company for uranium. It buys a certain portion of Cameco’s output and keeps it in warehouses in Canada. So it is a pure bet on the price of uranium,” he says.
Yellow Cake listed on the London Stock Exchange in 2018, raising £148.35 million. As the price for nuclear fuel has increased, the company has grown significantly. It has benefited from the increased price of uranium as global demand for nuclear energy surges.
