NLR

3 Nuclear Power Stocks Ready to Ride the AI Mega-Trend Higher

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In his 1973 speech, President Richard Nixon envisioned a plan to build 1,000 nuclear power plants under the “Project Independence” initiative, laying the groundwork for the emergence of nuclear power stocks. Under the plan, already in the 1980s, the US would’ve been completely energy self-sufficient.

But as it stands now, the US only has 54 nuclear power plants. However, as renewable energy continues to prove itself unreliable, drastically less dense and rife with hidden costs, nuclear power is gaining traction as a reliable carbon-free source.

Showing this revitalization, VanEck Uranium+Nuclear Energy ETF (NYSEARCA:NLR) is up 40% over one year. With the ongoing deployment of energy hungry AI infrastructure, the gains in the nuclear power sector are likely to continue.

Let’s take a look at the top three nuclear power stocks primed for further growth.

Denison Mines (DNN)

Denison Mines (NASDAQ:DNN) gained 104% value over one year, or 25% YTD, because when investors seek an energy source, they are particularly attracted to opportunities described by two words – large and undeveloped. These terms suggest significant potential and indicate that the asset is not yet fully valued.

This Canadian uranium exploration and development company holds near total (90%) interest in the Wheeler River project. Located in Athabasca Basin, the site was deemed to hold proven & probable reserves of 56.7 million lbs U3O3 (uranium trioxide). For comparison, an average nuclear power plant needs around 59k lbs of uranium trioxide annually.

In addition to this project, which is projected to have a base case operating profit margin of 90.9%, Denison Mines has a 22.5% stake in McClean Lake with an already operating uranium mill. Both Cameco and Kazatomprom are in business with Denison Mines, making it one of key uranium supply chain companies.

For investors seeking cheap nuclear power exposure, DNN stock also comes in handy as a penny stock. Per Nasdaq data, the average DNN price target is $2.54 vs current $2.11 per share. Interestingly, the low estimate of $2.17 is lower than its present price level. 

Duke Energy Corporation (DUK)

The logo for Duke Energy (DUK) is seen on a sign at one of the company's offices.

Source: Jonathan Weiss / Shutterstock.com

Duke Energy Corp. (NASDAQ:DUK) stands as a prime example of a safe nuclear power stocks investment option, particularly for investors looking to minimize risk. As a large utility company, it has the inherent stability needed to endure periods of inflation or high interest rates. This resilience is largely due to its ability to pass on increased costs to consumers, who consistently require electricity regardless of economic conditions.

For the long term future, Duke is investigating the deployment of small modular nuclear reactors (SMRs). The European Commission declared SMRs as key contributors to 2040 climate targets. Duke’s CEO Lynn Good sees SMRs as a potential jumping board to “invest at the commercial scale necessary to make a difference”.

In the meantime, Duke Energy serves 8.2 million US customers, generating 28.4% of energy needs from nuclear power in 2023. In its annual 2023 earnings report, Good emphasized the Treasury’s nuclear production tax credit (PTC) in 2024, noting that “these PTCs could be worth several hundred million dollars per year”.

If regulatory requirements are more aligned with American energy needs, Duke would be best positioned as the largest nuclear operator in the US. Overall, investors should view DUK exposure as safe nuclear and renewable dividend stock. Although DUK shares gained only 5% of value over five years, its dividend payouts continue to rise, now at $4.10 annual dividend per share.

Bwx Technologies (BWXT)

The logo for BWX Technologies (BWXT) is shown on a sign outside of an office building.

Source: JHVEPhoto / Shutterstock.com

Bwx Technologies (NYSE:BWXT) has been at the forefront of developing nuclear technologies. For this reason, the company receives the bulk of revenue from government contracts, particularly to supply the US Navy with nuclear propulsion.

The nuclear engineering company gained 48% value over one year. YTD, the stock went up 24%, owing to an 18% spike from February to March to its new all-time high of $105.36. From the present price of $94.56, BWXT stock is 36% away from its 52-week low of $60.17 per share.

The culprit for that sharp rise in evaluation is the company’s Q4 2023 earnings report, having tracked 16% revenue growth, at a record $2.5 billion. It bears noticing that Bwx has consistent free cash flow levels, both ~$200 million in Q1 2023 and Q4 2022 respectively.

In the latest quarter, Bwx reported $212 million, with 2024 guidance for $225 – $250 million. Investors should view BWXT exposure as a proxy to the US nuclear naval power that upholds the dominance of the dollar. For that reason, its 30-day slump of 7.5% is likely a buying on the weakness opportunity.

Per Nasdaq’s aggregated forecast data, the average BWXT price target is $105 vs current $94.56. The lowest estimate is $75 vs $123 for the high estimate twelve months ahead.

On the date of publication, Shane Neagle did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Shane Neagle is fascinated by the ways in which technology is poised to disrupt investing. He specializes in fundamental analysis and growth investing.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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