Energy

Given positioning that can only be described as ‘heavy’, there is a fair bit of thigh rubbing in anticipation of Nvidia’s earnings this week. As they have been in recent quarters, the numbers could well usher in trumpets, ‘blow out’ adjectives, and another pop in the shares. Valuation no longer matters, not in the context of AI. As, though, these chips get thinner, and faster with ever more byte, so the super computers they power consume more and more energy. Colossal amounts of energy. And where is this energy going to come from? The recent woes of Orsted and Siemens Gamesa portend the suggestion that it won’t be from wind, absent eye-popping subsidies from increasingly cash strapped governments. Against this backdrop the recent, rapid move of the spot uranium price through $80, a 16-year high, adds flavour to the soup. It’s really the long-term contract pricing that matters, but what is playing out in the spot market is something that several analysts have been warning about for some time: a ‘chaotic’ move to the upside. The reason is that demand is going up. And up a lot. Last week Sweden unveiled a road map which envisages the construction of massive new nuclear capacity, India has 20 new reactors due by 2031, with ambitions for 50. And ahead of the big-ticket COP 28 pow-wow the US announced that it is pledging to triple its nuclear power generating capacity by 2050. And asking other nations to do the same; and they will. Such a build out is even more aggressive than China, and will involve geeing up the World Bank and other financial institutions to include nuclear in their lending policies. Even John Kerry is on board, “Nuclear is 100% part of the solution” he whispered to a reporter over whisky sours aboard some private jet, en route to some far-flung conference. Uranium is relatively abundant in the ground, just not in commercial quantities. Those that have got it out of the ground are sold out, and those still digging, can’t dig it up quick enough to meet said demand. The NVIDIA story is well known, the uber-taut fundamentals in uranium, remain less so.