(Bloomberg) — Some hedge fund managers are sounding the alarm on overvalued nuclear power stocks and scaling back exposure after a stunning rally this year.
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Sydney-based Tribeca Investment Partners and Segra Capital Management in Palm Beach, Florida, are among funds that have recently trimmed bets on nuclear technology developers and utilities.
“The concern I have is some of this stuff has rallied hard,” said Guy Keller, a portfolio manager at Tribeca who oversees its long/short Nuclear Energy Opportunities Strategy. As a result, it makes sense to “bring my risk down.”
Still, “I 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 huge data centers required to power it mean the future of nuclear is now firmly tied to the seemingly unstoppable rise of Big Tech. At the same time, more green-oriented investors have started to embrace nuclear as a necessary part of the low-carbon energy transition.
Stocks swept up in the wave of enthusiasm include Constellation Energy Corp., which has almost doubled this year amid the revival of its shuttered Three Mile Island nuclear plant, and NuScale Power Corp., whose shares soared more than 800% until hitting a peak in late November.
Lisa Audet, founder and chief investment officer of Greenwich, Connecticut-based Tall Trees Capital Management, said she remains “cautious” on small modular reactor developers like Oklo Inc. and NuScale, even after watching the share prices come down.
Short interest as a percentage of shares outstanding currently stands at about 17% for Oklo and almost 15% for NuScale, according to IHS Markit data, compared with less than 1% for Constellation Energy.
Small modular reactors are intended to be faster and cheaper to bring into service than large-scale plants, though the technology remains in development and the first commercial projects aren’t likely until the 2030s, according to the International Energy Agency.
The rest of Wall Street is also turning more wary. A team of JPMorgan Chase & Co. analysts published a 63-page report in October warning of the risk of hype surrounding nuclear stocks, even coining a specific term for the moment: “NucleHype.”
