Sydney-based Tribeca Investment Partners and Florida’s Segra Capital Management are among several hedge fund managers raising concerns about the overvaluation of nuclear power stocks and reducing their exposure following an exceptional rally this year, according to a report by Bloomberg UK.
“The concern I have is some of this stuff has rallied hard,” said Guy Keller, a Tribeca Portfolio Manager who oversees its long/short Nuclear Energy Opportunities Strategy. As a result, it makes sense to “bring my risk down.”
However, in an interview, he said he would never take a short position, as a single data-centre announcement could lead to significant losses.
Nuclear power investing emerged as a major trend in 2024, with the growth of artificial intelligence and the massive data centres required to support it, tying the future of nuclear energy to the expansion of Big Tech.
Additionally, many green-minded investors have begun to view nuclear energy as a vital element of the low-carbon energy transition.
Among the stocks reportedly benefiting from this surge are Constellation Energy, whose shares have nearly doubled due to the revival of its Three Mile Island nuclear plant, and NuScale Power, whose stock skyrocketed by more than 800% before peaking in late November.
Lisa Audet, founder and chief investment officer of Connecticut’s Tall Trees Capital Management, remains “cautious” about small modular reactor (SMR) companies like Oklo and NuScale, even after their stock prices have corrected – SMRs are designed to be quicker and more cost-effective to deploy than traditional large-scale plants, but the technology is not anticipated to come online until the 2030s.
According to IHS Markit data, short interest as a percentage of shares outstanding is about 17% for Oklo and nearly 15% for NuScale, compared to less than 1% for Constellation Energy.
The broader sentiment on Wall Street towards nuclear power is also becoming more cautious.
In October, a team of analysts at JPMorgan Chase published a 63-page report warning of the overhyped nature of nuclear stocks, coining the term “NucleHype” to capture the current fervour. The report highlighted “inherent challenges” in the sector, such as uranium supply-chain constraints and the lengthy timeline for developing nuclear power.
Some hedge fund managers are finding opportunities in other parts of the value chain.
Arthur Hyde, a portfolio manager at Segra Capital, which manages $600m in assets mainly focused on nuclear and uranium, reportedly noted that a “fragile and fragmented” uranium supply chain should create upward pressure on prices in 2025.
Uranium prices have dropped about a third from their February peak, leading to a more modest 1.4% increase in the $3.4bn Global X Uranium ETF this year, compared to nearly 38% in 2023. Some mining companies are now considered oversold, according to Hyde.
However, nuclear technology valuations remain “relatively lofty,” and it will take substantial positive news to maintain these valuations heading into the new year, Hyde said.
As a result, Segra Capital has scaled back its holdings in US utilities and technology companies in the fourth quarter and increased its exposure to uranium producers and developers in the US, Canada, and Australia.
Keller from Tribeca said most of his fund is currently focused on uranium assets, partly based on a bet that Big Tech will soon expand its investments into the supply chains required for nuclear plants.
Both Segra Capital and Tribeca, which collectively hold over AUD200m ($127m) in the nuclear and uranium sector, remain optimistic about the incoming Trump administration’s stance on nuclear energy.
“I’m fairly confident that the Trump administration will be—and is—pro-nuclear,” Keller said.
