Of course, you can place a big bet on the AI infrastructure playing itself, or even on the AI companies actively building large language models (LLMs) and putting the finishing touches on their AI (or should I say superintelligence) research dream teams. But ultimately, it’s not just the well-known AI games that can deliver a world of growth. It’s likely that the more obvious plays on the market command a pretty hefty premium.
An AI boom could cause a bigger boom in uranium
Despite valuation concerns surrounding a handful of AI-driven tech stocks, investors have continued to invest in the potential AI winners. There appears to be a lot at stake as companies race to realize artificial general intelligence (AGI) sometime in the next five years.
At some point, some of the overheated AI stocks will start to fall. Some will be halved, and perhaps some will lose more than half their value. But at the same time, there will undoubtedly also be big winners, not only at the source of AI innovation, but also further down the chain.
As for the uranium miners, many of whom may still have room if given the chance to spark a revolution, I still think there is value to be had. The uranium miners themselves can be a rather tricky gamble, as uranium prices tend to fluctuate wildly.
And while betting on a commodity or its miner can cause choppiness, I also think the long-term trend is a friend to the top names within the space. So if you have a strong stomach and want to take advantage of the AI-powered nuclear renaissance without paying too high a premium, the following investments might be worth a look.
Cameco
Cameco (TSX:CCO) is one of the best uranium mining operations around. The stock has had a shocking run over the past six months, rising nearly 110%. No doubt I hit the miner earlier this year when stocks were in correction mode. And while you can’t turn back time, I think the last pullback is after the last 9% dip.
Sure, such a pullback doesn’t mean much, especially when you consider the stock’s violent meltdown just a few weeks ago. And while it’s harder to get behind the valuation (58.2 times price-to-earnings), I think the high price is worth it because it’s now a large market cap ($59 billion) with huge competitive advantages. With huge deals being signed and more likely to come, I think there are incentives to push CCO stock higher even if the recent rebound in uranium prices comes to a halt at some point.
Should a uranium shortage cause a spike in uranium prices, there’s no telling how high CCO stock could rise over the next three years as nuclear reactors seek fuel to power all those AI data centers. As prices rebound, I think Cameco could be a pricey-looking stock that turns out to be cheap.
Anyway, if you believe in the rise of AI, Cameco and the uranium games could be the best way to play it, given the crucial role nuclear reactors will play in the age of advanced AI.
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