MW This tech investor says the AI nuke trade is a loser. Here's why.
By Barbara Kollmeyer
These modular reactors are 'not good businesses,' says Josh Wolfe
If there's one thing that the investment world is quickly learning about artificial intelligence is that it has a ravenous desire for electricity and there still aren't enough sources out there to fuel it.
One potential solution that many big technology industry leaders have been exploring is the idea of sourcing power from nuclear energy. Google $(GOOGL)$ and Amazon $(AMZN)$ in October each announced plans to power AI needs with mini-nuclear plants, with Microsoft $(MSFT)$ inking a deal with Constellation Energy $(CEG)$ for nuclear power ahead of them.
And investors impressed by gains in the shares of Nvidia or Broadcom this year, should look at companies in that nuclear sector. NuScale $(SMR)$ stock has soared 538% year to date, Oklo $(OKLO)$, backed by OpenAI CEO Sam Altman, is up 123% so far this year and, Nano Nuclear $(NNE)$, which just listed this year, has gained 99%.
Investors should tread carefully with this AI theme though, says our call of the day from Josh Wolfe, the co-founder of New York venture capital firm Lux Capital, which invests in emerging science and technology.
In a thread on X posted earlier in December, Wolfe said that he pitched some stocks to short at a closed-door private investor event, naming those as Nano Nuclear (NNE), Oklo and NuScale.
While Wolfe said he's a big fan of nuclear energy, he believes the "MSFT, Meta, AMZN hyperscaler announcements on nuclear is for greenwashing to meet carbon commitments. And the 3-10 yr. RFPs for nuclear WONT happen as people think..."
Earlier this month, Meta $(META)$ launched an RFP, or request for proposals, for nuclear power developers to help fuel its AI power needs and meet clean energy goals.
"I do not believe that the modular reactors who have seen crazy run ups on expectations and hype... We have achieved much beyond paperwork and pledges that will economically disappoint. They are amazing technology and in the short term have been amazing stocks, but I do not believe they are good businesses," added Wolfe.
His preference in the sector: "large scale nuclear ('elemental energy" + abundant nat gas (esp in the Permian) = way to go."
And he expects 2025 to shape up with headlines like the following: "OKLO gets ok...to study site...to possibly build...or AMZN enters into agreement to...possibly buy...if[insert small modular reactors co] ever builds."
Goldman Sachs reported last month that hedge funds poured money into nuclear-power producers in the third quarter, to get ahead of an expected surge in electricity demand from AI. Vistra $(VST)$ and Talen Energy $(TLN)$ were among their VIP picks.
The markets
Stock index futures (NQ00) (ES00) (YM00) are dropping in holiday-thinned markets early Thursday. Over in Japan, the Nikkei JP:NIK closed up over 1%.
Key asset performance Last 5d 1m YTD 1y S&P 500 6040.04 -0.17% 0.31% 26.63% 26.50% Nasdaq Composite 20,031.13 -0.39% 4.47% 33.44% 32.88% 10-year Treasury 4.615 9.60 35.10 73.41 81.78 Gold 2640.7 1.58% 0.16% 27.46% 26.39% Oil 70.19 1.05% 2.06% -1.60% -4.92% Data: MarketWatch. Treasury yields change expressed in basis points
The buzz
Weekly jobless claims are due at 8:30 a.m. Eastern.
Alibaba $(BABA)$ is closing in on a deal to merge its South Korea operations with discount chain E-Mart (KR:139480), for a combined value of about $4 billion, Bloomberg reports.
Investigations are under way over why an Embraer jet crashed in southwestern Kazakhstan on Wednesday, killing at least 38 of 67 passengers.
Northwest Naturals is pulling a line of food from the shelves after a cat's death was linked to bird flu.
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The chart
In a post on X, Bespoke Investment Group points out that the S&P 500 has been trading above its 200-day moving average for all of 2024. That indicator is used by many traders to determine long-term trends of an asset or index.
"This has happened 11 other times since 1952, and the next-year move has been about half the average. Last time this happened was in 2021, and before that, 2017," says Bespoke.
Top tickers
These were the top-searched tickers on MarketWatch as of 6 a.m.:
Ticker Security name TSLA Tesla GME GameStop NVDA Nvidia PLTR Palantir Technologies MSTR MicroStrategy AAPL Apple TSM Taiwan Semiconductor Manufacturing AMD Advanced Micro Devices SMCI Super Micro Computer AVGO Broadcom
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-Barbara Kollmeyer
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(END) Dow Jones Newswires
December 26, 2024 06:50 ET (11:50 GMT)
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