Why the Sprott Uranium Miners ETF Could Be One of the Smartest Energy Plays of the AI Era

There's little doubt that generative artificial intelligence (AI) is reshaping the global economy. And here's a simple way to see it playing out. Data centers are consuming so much power that utility companies are still trying to figure out how to handle the demand.

This is the environment that utilities are facing. Global data center electricity use could double by 2030, according to some estimates. The Department of Energy thinks it might even triple. And in the United States, electricity demand is expected to hit record highs in both 2025 and 2026 after showing little growth in the two decades prior.

Whichever stat you want to look at, it's clear that data center power demand is going to keep rising. Quickly!

One energy source that is getting more attention as a means of servicing that demand is actually an old and misunderstood one: nuclear power.

This is why the Sprott Uranium Miners ETF (NYSEMKT: URNM) -- an exchange-traded fund focused on investing in uranium miners and physical uranium -- is starting to look more attractive right now. If electricity demand keeps accelerating as expected, the demand for uranium to fuel the nuclear industry could rise along with it.

Let's take a look at why now could be an ideal time to buy this ETF.

Image source: Getty Images.

The burgeoning nuclear boom

Nuclear power, not surprisingly, has a reputation problem. Catastrophic events, such as Chernobyl or Fukushima, show how when things go bad, they can go really bad.

The data, however, suggests that the nuclear story is more positive than people might give it credit for:

• Nuclear is already the second-largest source of clean energy in the world.
• Nuclear plants currently operate at over 90% capacity, making it far more efficient than both solar and wind.
• It can provide a consistent power supply that data centers need.

According to a recent commentary from Sprott, the lack of development and investment into the nuclear sector has contributed to a major supply deficit. With nuclear energy demand forecast to grow 28% by 2030 , a supply shortage could create an imbalance that persists for years even if nuclear development starts to ramp up.

In addition to big tech companies signing deals with nuclear energy companies, the best evidence for nuclear's potential to address AI energy demand is the U.S. government's recent partnership to construct at least $80 billion of new nuclear power plants with the goal of taking the lead in the global AI race.

The momentum has significant implications for the uranium industry.

These are the conditions that could (1) drive uranium prices higher and (2) improve profitability for uranium miners as margins improve. That's how Sprott Uranium Miners ETF becomes a real investment opportunity.

But it won't necessarily be a quick or easy road. The average construction time for new power plants is around 10 years, but the timeline for any individual project can vary widely.

Regulatory hurdles are a big roadblock that add to the timeline. The Nuclear Regulatory Commission (NRC) uses a complex, multistep process that involves environmental impact assessment and design certifications before the ground even gets broken.

That all makes this sector a long-term play, but one that's being eyed as a potential opportunity. Supply limitations and rising demand are setting the stage for a structural uptrend for uranium miners that could last for years.

Why URNM is positioned to benefit as uranium demand grows

The Sprott Uranium Miners ETF is one of the purest plays on the uranium narrative.

This fund invests entirely in uranium miners, developers, explorers, and physical uranium. In that way, it offers better exposure to the total space because it owns the companies that pull uranium out of the ground as well as the commodity itself.

The fund tracks the North Shore Global Uranium Mining Index. This index targets companies that devote at least 50% of their assets to the uranium mining industry. It typically holds about 30-40 names, including its current largest holdings, Cameco and National Atomic Company Kazatomprom JSC. Its expense ratio of 0.75% is a little on the high side, but not that unusual for a thematic ETF that targets a relatively narrow sector.

One of Sprott Uranium Miners ETF's advantages is that it hits all points of the nuclear fuel cycle. It invests in uranium explorers, miners, developers, and ultimately physical uranium itself. In that way, it offers better exposure to the total space.

Investing directly in uranium stocks tends to be more volatile because there are company-specific factors to consider, such as cash flow, capital expenditures, and margins. Trying to pick individual winners in a sector like this can be tricky, which is why owning the whole basket with URNM is the better bet. With the sector still developing, a more diversified composition could help balance out some risk.

A lot of people will think of AI as the biggest tech story of a generation. It may also end up being the biggest energy story in decades. As data centers expand and energy demand grows, clean and reliable power becomes a necessity. Nuclear energy, which has been long overlooked, is looking like a practical solution.

The Sprott Uranium Miners ETF is an ideal way to play an underappreciated theme in the AI boom.

David Dierking holds no positions in any of the securities mentioned in this article. The Motley Fool recommends Cameco. The Motley Fool has a disclosure policy.