Cameco Trades Near $85. Here's Why the Uranium Giant Might Be the Safest Way to Play the Nuclear Comeback

Nuclear power is experiencing something of a renaissance, as massive demand for electricity is outstripping the world's ability to produce it. Clean energy just won't be enough; an all-of-the-above strategy is the most likely winner. And that means more nuclear power, which puts Cameco (NYSE: CCJ) in a prime position to benefit. But this is a long-term opportunity, not a short-term trade. Here's why Cameco trading around $85 per share could be the safest way to play the nuclear comeback.

Wall Street is fickle, and Cameco got caught up in a mood swing

Over the past year, Cameco's stock has been as high as $134 and as low as, well, roughly $85. In fact, the stock has basically taken a round trip, rising from around its current levels 12 months ago and then returning. What happened in between was that investors got super excited about nuclear power before moving on to other investment ideas. That's how Wall Street works sometimes, with investors hopping from big idea to big idea.

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However, nuclear power's rebirth is very real. Electricity demand is expected to rise dramatically in the years ahead. To put a number on that, in the U.S. market, electricity demand increased by 10% between 2005 and 2025, but is projected to grow by 60% between 2025 and 2045. That's a step change in demand, driven by power-hungry technologies like artificial intelligence and electric vehicles, among other things. Nuclear power is likely to be a big beneficiary, given that it doesn't produce greenhouse gases and is always available, unlike solar and wind.

There are currently 417 operating reactors worldwide, with another 77 under construction. Cameco estimates the demand for uranium will outstrip supply in the early 2030s. That's important because Cameco mines uranium and produces nuclear fuel. More reactors mean more customers for Cameco to sell to. And since uranium is a commodity, demand outstripping supply will likely mean higher commodity prices.

Cameco wins in other ways, too

So Cameco's uranium operation is a picks-and-shovels play on nuclear power. But Cameco also own half of Westinghouse, one of the world's largest service providers to the nuclear power industry. That business provides more reliable cash flows, helping to balance the more volatile uranium operation. And, once again, more reactors means more customers. Unless the world decides en masse to abandon nuclear power, Cameco looks well-positioned to benefit from the nuclear comeback.

If you are looking at money-losing nuclear power start-ups like Oklo (NYSE: OKLO) or NuScale Power (NYSE: SMR), you may want to step back and do a deep dive into industry supplier and service provider Cameco. It will likely be a much safer option.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cameco. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.