(Bloomberg) — Some hedge fund managers are sounding the alarm on overvalued nuclear power stocks and reducing exposure after a stunning rally this year.
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Sydney-based Tribeca Investment Partners and Palm Beach, Florida-based Segra Capital Management are among funds that have recently hedged bets on nuclear and utility technology developers.
“The concern I have is that some of these things have escalated,” said Guy Keller, a portfolio manager at Tribeca who oversees its long/short Nuclear Power Opportunities Strategy. Consequently, it makes sense to “bring my risk down.”
Still, “We would never” build a short position “because you're one data center announcement away from blowing yourself up,” Keller said in an interview.
Investing in nuclear power emerged as one of the hottest energy themes of the year. The rise of artificial intelligence and the massive data centers needed to power it mean that the future of nuclear is now firmly tied to the seemingly unstoppable rise of Big Tech. At the same time, more green investors have begun to embrace nuclear as a necessary part of the low carbon energy transition.
Among the stocks swept up in the wave of enthusiasm are Constellation Energy Corp., which has nearly doubled this year amid the revival of its shuttered Three Mile Island nuclear plant, and NuScale Power Corp., whose shares rose more than 800% to a peak of the end of November.
Lisa Audet, founder and chief investment officer of Greenwich, Connecticut-based Tall Trees Capital Management, said she remains “cautious” on developers of small modular reactors such as Oklo Inc. and NuScale, even after watching the share prices come down.
Short interest as a percentage of shares outstanding is currently around 17% for Oklo and nearly 15% for NuScale, according to IHS Markit data, compared to less than 1% for Constellation Energy.
Small modular reactors are intended to be faster and cheaper to implement than large-scale plants, although the technology is still being developed and the first commercial projects are not likely until the 2030s, according to the International Energy Agency.
The rest of Wall Street is also turning more cautious. A team of JPMorgan Chase & Co. analysts announced. a 63-page report in October warned of the risk of hype around nuclear stocks, even coining a specific term at the moment: “NucleHype.”