NLR ETF: Best nuclear energy ETF to ride the AI-driven energy wave?

In a world fraught with geopolitical uncertainties and climate crises, nuclear energy continues to stay relevant.

Recent arrival of artificial intelligence into the mix has given rise to more speculation about the future of nuclear energy.

As a result, nuclear energy ETFs have become more relevant.

In the form of VanEck Uranium & Nuclear ETF (NLR), we have an ETF that offers a well-diversified exposure to nuclear energy, utility, and uranium stocks.

Why is nuclear energy in demand for AI?

What makes nuclear energy so special is that it is easily available even when the sun sets or the wind dies down.

This consistent availability of energy is vital to keep running the data centers that the whole of AI infrastructure is built upon.

According to the International Energy Agency, electricity consumption from AI and cryptocurrency could double by the year 2026.

Forecasts like these have caused energy stocks to rally.

But nuclear energy stocks have seen more volatility as a result of these forecasts.

Let’s also not forget that in an increasingly volatile world, nuclear energy’s military applications are only going to gain traction, helping keep uranium prices at relatively high levels.

The nature of AI models

AI models like ChatGPT typically require a lot of energy during training.

Once they are ready, they do not require the same processes again and again.

However, this does not mean that the energy requirements die down along with it.

As these models move mainstream, the sheer volume of users using them makes it consume energy at similar levels again.

From shareholders’ perspective, even if a particular power company has already benefitted from the training of AI models, it can continue to take the same benefit once users start using the developed model.

VanEck Uranium & Nuclear ETF

The VanEck Uranium & Nuclear ETF (NLR) is a diversified bet on the whole nuclear energy ecosystem.

Over 10% of its portfolio is scattered across top mining companies of Canada and Kazakhstan.

Cameco and Kazatomprom, two of the world’s top mining companies for uranium, form over 27% of the ETF’s portfolio.

A quarter of the portfolio is also spread across US electric and gas utility companies.

Short term headwinds provide a buying opportunity

Election year always comes with uncertainties, particularly in the energy sector. This time is no different.

Donald Trump is pro oil and one can never rule him out of the presidential race, no matter what the odds.

He has been vocal about supporting oil companies and has even said a few positive things about the EV industry in order to keep Elon Musk on his side.

A Kamala Harris presidency is likely to keep the momentum going for cleaner energy policies to combat climate change.

But no matter who is in the White House, uranium prices are expected to remain elevated.

The ETF is off 22% from its 52 week highs.

Its one year performance shows it outperforming most of its peers, and that’s where it really shines.

The ETF’s diversity has helped it survive at a time when Uranium stocks are facing short term headwinds. It could be a good time to add it to one’s portfolio.

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