‘Trading on hype’: Investors bet against nuclear despite big tech interest

Uranium miners have emerged among the most shorted stocks on the Australian market, with local investors betting against a boom in US tech companies’ use of nuclear power to fuel energy-hungry AI data centres.

Microsoft, Google and Amazon have signed multimillion-dollar nuclear deals to power their data centres. More recently, Amazon invested $US500 million ($757 million) in developing small modular reactors, and Bill Gates’ nuclear company TerraPower has secured more than $US3 billion in funding for “next-generation nuclear power”.

One of Deep Yellow’s uranium mines in the Northern Territory.Credit:

This surge in nuclear interest has trickled down to the ASX, though investors remain sceptical. Uranium companies Boss Energy, Paladin Energy and Deep Yellow are now among the most shorted stocks on the ASX200, with Boss’ and Paladin’s short interest rising rapidly since June.

Short selling is a risky investment tactic that involves an investor borrowing stocks from brokers and then immediately selling them, before buying the stocks back at a low price when the share price drops, and finally returning the shares while pocketing the difference.

US tech’s interest in nuclear power is driving short sellers to uranium, which a few years ago yielded little investor attention, said nabtrade’s Gemma Dale, a director of self-managed super funds and investor behaviour.

“Short sellers only target things they think are overvalued,” Dale said. “So the simple premise is they think uranium stocks are overvalued and have the potential to fall.”

Dale said that because uranium produces minimal emissions, short-sellers see it as the new renewable energy source that will fuel the expanding use of artificial intelligence (AI).

“Over the last 12 months, [there] has been a kickoff in appetite for AI,” Dale said. “Every significant investor has very quickly drawn the line between the potential for AI, the extraordinary arms race in developing capability, and the amount of power it requires to run a data centre of that magnitude.

“Vermont in the US, as a state, a quarter of their energy now goes just to data centres. How on earth do we generate that amount of energy without completely crippling everything? Nuclear becomes a very obvious solution.”

Jun Bei Liu, a portfolio manager at Tribeca Investment Partners, said investors were banking on uranium to avoid an inevitable energy shortage crisis.

“Oil prices have been weak for some time now because of slowing global growth, and that is now creating a bit of concern [as to] whether, in the future, there will be demands [for more energy],” she said.

“Seeing people take money out of a sector where your true earnings will not be there for quite some time, it’s really just trading on sentiment – they’re trading on hype.

“In the US particularly, those utility companies are probably best positioned in building infrastructure. I think uranium will have a future in the entire energy transition. It’s just thematic investing currently for investors because those companies are still quite early-stage.”

Nuclear energy provides consistent power at all times of day without producing greenhouse gases, making the source ideal for tech companies that have pledged to produce emissions-free energy by 2030.

In the United States, wind and solar energy are much less reliable and consistent, around-the-clock energy requires batteries to power data centres. Most emissions-free energy targets were made before the AI boom, which requires more energy to fuel, prompting big tech companies to strike nuclear power deals.

Australia is home to more than a third of the world’s uranium deposits and has one active nuclear plant – in Lucas Heights, NSW – which is only in use to produce radionuclides for nuclear medicine, such as X-rays.

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