Could These Stocks Go Nuclear?
I’ve spoken recently about what I call The Great Convergence – three megatrends that are converging, changing our world… and creating massive wealth for smart investors.
All three pillars are essential to unleashing the next tech revolution’s full impact:
- Artificial Intelligence
- Quantum Computing
- Advanced Networking
And you know what’s essential to these three pillars?
Power. A lot of power.
The AI Now Institute – a research group focusing on the social impacts of A.I. – estimates that some new A.I. servers could use up more than 85 terawatt hours of electricity per year.
If you’re not sure what that means, it’s more than some small nations’ use in a year.
Clearly, we need to generate more power. And buzz is growing around nuclear power, but not in the way you might think.
Nuclear power sounds scary. The Three Mile Island accident and Chernobyl disaster within 10 years of each other caused a lot of fear and hesitancy around this power source. Understandably so.
But like everything else, it’s come a long way in the nearly 40 years since Chernobyl.
The technology has advanced. Don’t picture the massive cooling towers we associate with nuclear power plants. Scientists have developed small modular reactors (SMRs) that produce less power but can fit on the back of a truck or in a shipping container, making them more viable for localized power generation like data centers.
There’s now updated safety protocols and new laws to protect the workforce and surrounding population, and – more importantly – to prevent another disaster altogether.
Nuclear is also a clean energy source that gives off zero emission. Something we need right now and for our future.
It’s one reason why tech firms and Silicon Valley billionaires have poured money into nuclear energy for years. And now they have another reason: powering A.I.
Just last summer, Microsoft (MSFT) signed a deal with Constellation Energy (CEG), one of the top nuclear power plant operators, to add nuclear-generated electricity to its data centers in Virginia.
The year before, Google participated in a $250 million fundraising round for a fusion startup called TAE Technologies. And in 2021, Jeff Bezos (and others) raised over $130 million for Canadian nuclear company General Fusion.
As this latest technology revolution unfolds, nuclear power is gaining steam (sorry) as as a viable resource to meet the ever-growing power demands of A.I.
The tech giants are pouring money into this power source, so investors could be too, right? Let’s see what my Quantum Edge system says about three nuclear stocks getting some attention right now.
Vistra (VST)
Source: TradeSmith Finance and MAPsignals.com
According to Bank of America, we’re in a nuclear power “renaissance” thanks to the increasing demand for data centers. And, according to BofA, Vistra (VST) is set to benefit.
Probably, but not definitely.
Vistra’s Quantum Score of 72.4 is in fact in the optimal buy zone of 70 to 85. We’re off to a good start.
Its Technical Score is also good at 88.2, and Big Money is buying in. My system picked up a whopping 15 buy signals (green bars) in the past 30 days and 18 in the past 90. That’s impressive.
Source: MAPsignals.com
The red flag is VST’s fundamentals. Earnings and sales aren’t growing – earnings have shrunk 164% in the last three years. The company also carries big debt at nearly three times equity. That’s enough to scare me off at the moment.
The stock has rallied nearly 57% this year, though. And with the increasing need for data centers and green energy to power them, this could be a stock to keep an eye on.
Constellation Energy Group (CEG)
Source: TradeSmith Finance and MAPsignals.com
Yes, this is the Constellation that Microsoft just signed a deal with.
Constellation Energy Group (CEG) is one of America’s leading clean energy companies, and in addition to powering Microsoft’s Virginia data centers, they’ve also collaborated with the tech giant to develop a 24/7/365 energy matching solution that allows customers to fully achieve zero emissions goals.
CEG’s Quantum Score of 69 isn’t quite as good as Vistra’s, but it’s just under my optimal buy zone by one point. That’s not reason in and of itself to worry.
But again, while the Technical Score of 79.4 is great, the Fundamental Score of 54.2 isn’t. Sales and earnings growth show hints of being what I’d like to see, but they haven’t been consistent yet.
Shares have decent momentum, but the data doesn’t give me the confidence that the momentum is here to stay. It’s an interesting company worth keeping on the radar.
Albemarle (ALB)
Source: TradeSmith Finance and MAPsignals.com
Albemarle (ALB) isn’t an energy producer, but it does manufacture an important chemical in the nuclear fusion process: lithium.
The Lithium-6 isotopes are indispensable in the fusion process, which makes ALB a compelling nuclear stock.
If you look at this stock’s scores, you see that it’s the exact opposite of the other two we’ve covered so far. Its Quantum Score of 51.7 is weighed down by its bleak Technical Score of 32.4. But ALB becomes more interesting when you look at the company’s fundamentals.
The Fundamental Score of 79.2 is much higher. Sales and earnings are growing nicely – earnings per share have grown 647% the last three years – and the debt level is less than 50% of equity, not nearly the concerning levels of CEG and VST.
This exact scenario is something I talked about in Thursday’s Power Trends.
Fundamentals measure the strength of the business, while technicals measure the strength and trading characteristics of the stock. The data tells us we have a fundamentally solid company whose shares are in the tank.
I continue diving into the long-term data, but not surprisingly, I’m finding that these scenarios usually resolve themselves with the strong fundamentals pulling up the price. You can see how that could be a buying opportunity, and I will keep you posted on the research.
As more and more deals between tech giants and nuclear energy companies continue, these stocks are certainly ones we should keep our eyes on. But as for right now, they don’t rate high enough in my Quantum Edge system. That means they don’t have a high enough probability of making the kind of money we’re after.
And that’s the point behind my whole system – to put the odds firmly on my side, win more than I lose, and have my winners be bigger than my losers. The Quantum Score helps me do that, and independent back testing has shown that it outperformed the market 7-to-1.
This valuable data is now available to all members of my Quantum Edge Pro service. You can access the Quantum Score – and the Fundamental and Technical Scores we’ve talked about today – for the roughly 6,000 stocks tracked by my system.
Click here to learn more if you’re interested in accessing this data.
Talk soon,
Jason Bodner
Editor, Jason Bodner’s Power Trends