Travis Hoium, The Motley Fool
4 min read
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An executive order boosting nuclear energy production, permitting, and construction is expected to be signed as early as today.
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Nuclear energy stocks are up big on the news, but this may leave investors disappointed.
Reuters has reported that President Trump is planning to sign an executive order to speed up the permitting and construction of nuclear energy power plants in the U.S. as early as today. The market didn't ask questions and simply bid up nuclear stocks today.
As a result, anything related to nuclear energy was up big, with Oklo (NYSE: OKLO) up as much as 31.3%, Centrus Energy (NYSEMKT: LEU) up 26.5%, Nano Nuclear Energy (NASDAQ: NNE) jumped 29.7%, NuScale Power (NYSE: SMR) was up 18.3%, Energy Fuels (NYSEMKT: UUU) rose 19.1%, and Uranium Energy (NYSEMKT: UEC) popped 26%.
As of this writing, at 1:30 p.m. ET, there's no executive order signed, and the most we have is reporting from Reuters. It says the order would invoke the Defense Production Act and direct the Departments of Energy and Defense to speed up the construction of new nuclear reactors.
The reporting indicates that reliance on Russia and China for enriched uranium is the basis for the order, with the administration hoping to push development on both private and public land.
As with most executive orders, the impact may not be as big as investors might think. It will still take many years to permit and build nuclear power plants, and it's not clear if they would be cost-effective today anyway. So, the sentiment may be correct by the administration, but the financial impact for these companies may disappoint.
The bounce is almost entirely built on speculation because most of these companies are either very low revenue or pre-revenue. They're developing technology or solutions for the industry, but that hasn't even manifested in paying customers to this point.
As investors, that's a big risk to take for an industry that moves in decades, not months or years. The Obama administration tried to rejuvenate the nuclear industry over a decade ago, and that didn't work, so it's not clear why this would be different.
This isn't the first time the nuclear industry has gone through hype cycles. You can see in the chart that long public stocks like Energy Fuels and Uranium Energy have been extremely volatile for two decades.
But over that time, they haven't generated meaningful or sustainable earnings that investors can count on.
