Uranium provider and nuclear fuel services company Cameco(NYSE: CCJ) stock has risen more than 22% over the last month, and, understandably, some investors might be looking to take profits. Still, the investment case for the stock doesn't rest on a near-term improvement in sentiment on the nuclear industry, but rather on its long-term potential as a clean power source.
Nuclear power is back in favor
There's little dispute over why the stock is up heavily in recent weeks. Following on from the deal Amazon Web Services made with Talen Energy in March to buy energy from the latter's Susquehanna nuclear power plant, Microsoft recently signed a 20-year power purchasing agreement to buy power from Constellation Energy.
Both deals highlight the attractiveness of nuclear energy in providing power for data centers run by the leading cloud services companies. It's no secret that burgeoning demand from artificial intelligence (AI) applications is creating an increasing demand for power at data centers, and nuclear power is a reliable and clean energy source that helps companies like Microsoft and Amazon meet their environmental goals. Investors are buying Cameco stock to get exposure to the theme.
A long-term perspective
That said, there's a bigger-picture perspective to consider here. While the clean energy transition is still taking place, there's a growing acknowledgement that it will take place at a slower pace than initially thought, and growing recognition that renewable energy's intermittency means it needs to be supported by more reliable energy sources such as gas and nuclear power.
Image source: Getty Images.
That perspective speaks to the long-term potential for a lasting wave of investment in nuclear power that goes beyond the recent agreements signed by Amazon and Microsoft. Consequently, Wall Street might need to revise its long-term profit expectations for Cameco.
Given its natural business moat -- uranium and nuclear fuel services are not easy businesses to enter -- this could lead to long-term profitability growth at Cameco.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Constellation Energy, and Microsoft. The Motley Fool recommends Cameco and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
