Why I Am Still Investing in Uranium
The Uranium Opportunity: A Looming Supply Crunch and the Coming Price Surge
I promised you guys an investing update - here it is:
The world stands on the brink of an energy transformation, and uranium - the silent workhorse of nuclear power - is about to take center stage. While most investors focus on flashier commodities like lithium or crude oil, a quiet revolution is brewing in uranium markets that could create one of the most compelling investment opportunities of this decade. I am part of that revolution, and I am investing big in it.
The thesis is simple but powerful: global uranium demand is set to dramatically outstrip supply, and when this imbalance hits, prices could skyrocket to levels not seen since the 2007 uranium bull market. This isn’t Bitcoin, or Gold, or Gamestop. The sector is microscopic in size, so when the world’s nuclear reactors and fuel buyers need U308, look out. The squeeze will be epic - to the tune of emptying out all the water behind Hoover Dam, by using a drinking straw.
Something to think about. Justin Huhn of Uranium Insider mentioned last year that the thesis was simple, but that does not mean it is easy. The waiting and the psychology of the trade is the hard part.
Understanding the Supply-Demand Dynamics
At the heart of this opportunity lies a fundamental mismatch between uranium production and consumption. The world currently consumes about 62,500 metric tons of uranium annually to fuel its 440 nuclear reactors. Primary mine production supplies approximately 49,000 tons, with the balance coming from secondary sources like government stockpiles, reprocessed fuel, and decommissioned nuclear weapons. This delicate balance has held for years, but it's about to break. Naturally, the timing of things is the sticking point. I will embed the Mike Alkin interview below that was the motivation for this article. He’s the best analyst in the sector, and he lays much of this information out nicely.
Several factors are converging to create what industry experts predict will be a severe supply shortage:
Nuclear Renaissance - Countries worldwide are embracing nuclear power as a clean, reliable energy source. China is leading the charge with stated plans to build 150 new reactors by 2035, while other nations including India, France, and even traditionally nuclear-skeptical countries like Poland are expanding their nuclear fleets. The Vogtle reactors in Georgia are now up and running. Microsoft has been jockeying to reopen the 3 Mile Island reactor for its AI energy needs. The International Energy Agency estimates global nuclear capacity needs to double by 2050 to meet climate goals. Nuclear Energy is carbon free, and its the safest type of energy in the world, as well as the most energy dense.
Aging Mines and Lack of Investment - The uranium mining industry has suffered from chronic underinvestment since the Fukushima disaster in 2011. Many mines were shuttered during the subsequent price collapse, and new projects take 7-10 years to bring online. Even at current prices around $85/lb, few new mines are being developed fast enough to meet future demand.
Depleting Secondary Supplies - The "safety valve" of secondary supplies is running dry. The Russian HEU agreement (which converted nuclear warheads into reactor fuel) has ended, and utility stockpiles are dwindling after years of under-purchasing.
The Price Mechanism: Why Uranium Moves Differently
Unlike more liquid commodities, uranium has unique market characteristics that both mask the coming shortage and amplify its eventual price impact:
Long-Term Contracts Dominate - About 90% of uranium changes hands through multi-year contracts between utilities and miners. This means spot price movements often lag fundamental shifts.
Thin Spot Market - Only 15-20 million pounds trade annually on the spot market (versus 180M+ pounds of total demand), making prices highly sensitive when utilities enter the market.
Inelastic Demand - Nuclear plants must keep operating once built, meaning utilities will pay almost any price to secure fuel rather than shut down. Without the Uranium, a nuclear reactor is a $15 billion paperweight.
These factors explain why prices haven't surged yet despite the clear fundamentals. Utilities have been slow to return to the market, preferring to draw down inventories rather than commit to long-term contracts. But this can't last forever.
The Coming Inflection Point
Multiple indicators suggest we're approaching a critical juncture:
Utility Contracting Cycle - Nuclear plants typically secure fuel 3-5 years before needing it. With many utilities now under-contracted for 2026-2028 requirements, a wave of buying appears imminent.
Inventory Depletion - Industry reports suggest utility inventories have fallen from 2+ years of coverage to about 1.5 years, pushing buyers closer to the market.
Production Challenges - Major producing regions face growing obstacles. Kazakhstan's output growth is slowing due to infrastructure constraints, while political instability threatens production in Niger and Namibia.
Financial Demand - Vehicles like the Sprott Physical Uranium Trust (SPUT) are removing physical uranium from the market at a rate of about 3-4 million pounds annually, further tightening supply. This has slowed recently, but the SPUT purchases have wiped millions of pounds off of the market.
Historical Precedents and Price Targets
The last major uranium bull market (2004-2007) saw prices soar from $20 / lb to $140/ lb (equivalent to about $200 / lb today). The current setup shares striking similarities:
Both periods followed years of underinvestment
Both saw demand surge unexpectedly (China then, global decarbonization now)
Both featured supply disruptions (mine flooding then, geopolitical risks today). Interesting to note that the mine flooding at Cigar Lake, seen as a catalyst for the 2006 Uranium price spike, took place while there was a surplus of Uranium. Now, if there is a price spike, there is a Uranium deficit. I cannot, nor can DeepSeekAI, who I asked, predict how high the price could go.
Analysts at major banks including Bank of America and Goldman Sachs have published price targets suggesting $150 /lb uranium is plausible in the coming years. However, in a true supply crunch scenario, where utilities panic buy, prices could potentially exceed $300/lb.
Investment Implications
For investors, this creates multiple avenues to participate:
Physical Uranium - Through vehicles like SPUT, investors gain direct exposure to uranium price movements without mining risks.
Uranium Miners - Companies like Cameco, Kazatomprom, and NexGen Energy stand to benefit enormously from higher prices. Many miners have significant operating leverage - every $10/lb price increase can flow almost entirely to their bottom line.
Exploration Companies - Junior miners and developers could see explosive growth if they successfully define new resources in a high-price environment.
Nuclear Services - Companies involved in fuel processing, reactor services, and nuclear technology may benefit from the broader industry revival.
Risks to Consider
While the outlook appears compelling, investors should remain aware of potential pitfalls:
Project Delays - New mines often face permitting and construction setbacks
Policy Changes - Nuclear phase-outs in some countries could offset growth elsewhere. We have seen Germany commit energy suicide by shutting down its nuclear reactors.
Technological Shifts - Advanced reactor designs or fuel recycling could alter demand patterns
Market Structure - The illiquid nature of uranium markets can lead to extreme volatility
What are the odds?
I asked DeepSeek about the odds of a spike in Uranium prices using decades of past history, as well as current market outlook. Here is what came out:
My friend owns 4560 shares of SPUT. He is wondering what the odds are that those shares could turn into around $500,000 of after tax profit in NYC. Can you do the math and give him the odds of such an event happening by the end of 2027?
Sensitivity Table: SPUT Price → After-Tax Profit
The Time to Act Is Now
What makes this opportunity particularly attractive is that the broader market hasn't yet fully appreciated the coming supply crunch. Uranium remains a niche sector, overlooked by most institutional investors. But as the deficit becomes undeniable - as utilities start paying $100, then $150 per pound, then potentially much more per pound - capital will flood into the sector.
The window to establish positions at reasonable prices may be closing. Once the uranium price breakout gains mainstream attention, the move could be swift and dramatic. For investors who understand the fundamental story and have the patience to wait for the thesis to play out, the potential rewards could be extraordinary.
Remember the Gamestop squeeze? That would be nothing compared to what would happen in the Uranium market, particularly if institutional investors get involved, and FOMO (Fear of Missing Out) comes into play.
In energy markets, shortages resolve in only one way - through higher prices. For uranium, all the pieces are in place for a historic rally. The only question is whether investors will be positioned before the crowd arrives.
Here is the Mike Alkin interview - I recommend it highly:
Alkin begins at 3:23
Full disclosure - I have shares of $SPUT in my portfolio.
Disclaimer:
This post / article does not constitute professional legal or financial advice and is not a substitute for professional financial advice. This post does not create an advisor-client relationship, nor is it a solicitation to offer financial advice. Furthermore, it represents the views of the author only, and does not represent the views of any agency of the United States government, NY Government, or any other entity. I am not a financial advisor, this is not financial advice. I am a tired, broken down English teacher in the Bad Neighborhood planning for his retirement, not a stock guru / advisor in any sense of the word. Seek professional and licensed advice before putting any of your hard earned money in these crazy markets.