Nuclear fusion technology could be a $40 trillion market

Scientists at California Department of Energy’s Lawrence Livermore National Laboratory (LLNL) announced the first demonstration of fusion “ignition”. This means that more energy was generated from the fusion than was needed to operate the high-powered lasers that triggered the reaction. More than 2 megajoules (MJ) of laser light were directed into a small gold-plated capsule, resulting in the production of just over 3 MJ of energy, the equivalent of three sticks of dynamite.

This important milestone is the culmination of decades of research and much trial and error, and fulfills the hope that humanity will one day enjoy 100% clean and abundant energy.

Unlike conventional nuclear fission, which produces highly radioactive waste and carries the risk of nuclear proliferation, nuclear fusion has no emissions or risk of catastrophic disaster. That should please activists who support carbon-neutral renewable energy sources like wind and solar, yet oppose nuclear power.

75th Anniversary of Another Great American Invention, The Transistor

I think it stands to reason that this breakthrough occurred not only in the US, the most innovative country in the world, but also on the 75th anniversary of the invention of the transistor.

Like fusion power, the importance of the transistor cannot be overstated. Invented in December 1947 at Bell Laboratories in New Jersey—also the birthplace of the photovoltaic cell, fiber-optic cable, communications satellite, UNIX operating system, and C programming language—the transistor made possible the twentieth century. Everything we use and enjoy today, from our iPhones to our Teslas, wouldn’t exist without the pivotal American invention.

In 2021, the electric vehicle maker introduced its proprietary application-specific integrated circuit (ASIC) for artificial intelligence (AI) training. The ASIC chip, believe it or not, has an incredible 50 billion transistors.

Private investment in fusion technology has been on the rise

Electricity from a commercial fusion reactor is still years, if not decades, away, but that hasn’t stopped money from flowing into the sector. This year, private investment is estimated to exceed one billion dollars following the record $2.6 billion that went to merger research in 2021, according to BloombergNEF.

Private sector investment in nuclear fusion may top $1 billion by 2022

At the moment, there is no publicly traded merger company. However, Bloomberg does have a Global Nuclear Theme Peers Index that tracks publicly traded companies with exposure to the industry, estimated by Bloomberg to one day achieve a staggering $40 billion valuation. Some of the more recognizable names include Rolls-Royce, Toshiba, Hitachi, and General Electric.

For the five-year period, the index of 64 “core” stocks has advanced approximately 100%, compared to the MSCI World Index, up 38% over the same period.

Nuclear stocks have outperformed the global market

The number of private companies involved in R&D continues to grow, raising the possibility that some will tap into public markets in the coming years.

Among the biggest is Commonwealth Fusion Systems, or CFS, which spun out of MIT’s Plasma Science and Fusion Center in 2018. The company raised $1.8 billion in December 2021, on top of the $250 million it had previously raised. Its investors include Bill Gates and Google, along with oil companies, venture capital firms and sovereign wealth funds. CFS claims to have the fastest and lowest cost solution for commercial fusion power and is in the process of building a prototype that will demonstrate net power gain by 2025.

Another important player is TAE Technologies. Located in California, the company has raised a total of $1.2 billion as of December 2022, from investors including the late Paul Allen, Goldman Sachs, Google and the family office of Charles Schwab. TAE says it is developing a fusion reactor, scheduled for launch in the early 2030s, that will generate electricity from a proton-boron reaction at an incredible temperature of a billion degrees.

Other contenders in the field include Washington state-based Helion Energy, Canada’s General Fusion and the UK’s Tokamak Energy. In February 2022, Tokamak broke a historical record by generating 59 MJ of energy, the highest sustained energy pulse ever seen.

As an investor I would keep an eye on this space!

Solar accounted for 45% of all new power capacity growth in the US.

Meanwhile, forward-looking energy investors still have renewable energy stocks to consider.

2022 has been a challenging year for the industry, with much of it facing supply constraints. According to mackenzie Wood, Total new US solar installations were 18.6 gigawatts (GW), a 23% decrease from 2021.

Still, solar accounted for 45% of all new electricity generation capacity added this year through the end of the third quarter. That’s bigger than any other power source. Wind power came in second, accounting for a quarter of all new energy, followed by natural gas at 21% and coal at 10%, its best year since 2013.

Share of new US electricity generation capacity additions

WoodMac expresses optimism in the next two years. Solar projects that were delayed this year due to supply issues may finally come online in 2023, and by 2024, the real effects of President Biden’s Inflation Reduction Act (IRA) should be felt. The UK-based research firm forecasts average annual growth of 21% from 2023 to 2027, so now may be an opportune time to start participating.

One of our favorite plays right now is Canadian Solar, up over 11% for the year. On Thursday of this week, the Ontario-based company Announced that it would begin mass-producing high-efficiency solar modules in the first quarter of 2023. Canadian Solar shares rose more than 1% last week, despite experiencing two days of declines on news this week about continued rate increases through 2023.

Originally published by US Global Investors on December 19, 2022.

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All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate for all investors. By clicking on the above links, you will be directed to third party websites. US Global Investors does not endorse all information provided by this/these websites and is not responsible for their content.

The BI Global Nuclear Theme Peers is a non-financial benchmark index that tracks 64 companies exposed to nuclear power research and production. The MSCI World Index is a free float weighted equity index that includes markets in the developed world and does not include emerging markets.

Participations may change daily. Holdings are reported at the end of the most recent quarter. The following securities mentioned in the article were held by one or more accounts managed by US Global Investors as of (09/30/22): Tesla Inc., Canadian Solar Inc.

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