How can I get cost-effective exposure to the nuclear theme?
To help you navigate today's dynamic market, and help your clients achieve their goals, we’ve launched From the Field. Each month, our State Street SPDR® ETF Strategy team will answer timely questions from advisors like you.
Our clients often ask me how they can efficiently invest in nuclear power. With its consistent 24/7 output, zero-emission operation, and exceptional capacity, nuclear power has been earmarked as a potential long-term solution to the nation’s energy deficit problem.
After decades of grid stability, the US is now experiencing newfound energy demand driven by the proliferation of data centers that can use as much power as 80,000 homes.1 In addition, data center power consumption is estimated to triple by 2030.2 Nuclear energy will likely be the solution to this growing demand.
How can you access the nuclear theme?
The State Street® Utilities Select Sector SPDR® ETF (XLU) offers broad, cost-effective exposure to nuclear advancements. The SPDR Research team measures XLU’s nuclear involvement at 71%,3 where involvement is defined as:
- Direct involvement: The company produces nuclear power, including utilities that own or operate nuclear power generators.
- Indirect involvement: The company provides products/services that support the nuclear power industry, such as designing and constructing nuclear power plants, manufacturing specialized parts for use in nuclear power plants, or companies involved in uranium mining exploration. The company may also distribute electricity generated from nuclear power.
Additional benefits of adding Utilities
Utilities offers potential for both protection and performance, driven by the tailwinds of the macro environment and nuclear adoption. The sector has a negative correlation to short-term yields,4 which have fallen recently after the Fed continued its rate-cutting agenda this month. And historically, the Utilities sector outperforms the broad market by 10% during a recession and other cyclical sectors like Real Estate by 20%.5
This is notable for clients who believe the economy is challenged as we face labor market weakness and the lagged effects of restrictive monetary policy from 2022.
Utilities has also outperformed the S&P 500 year to date. The two biggest contributors to performance—Vistra (VST) and Constellation Energy (CEG), up 52% and 44% year to date, respectively6—have publicly expanded their nuclear footprint as the US aims to quadruple nuclear energy capacity to 400GW by 2050.7
Vistra acquired Energy Harbor last year to expand its nuclear fleet by three reactors, making Vistra the second-largest nuclear operator in the country.
Constellation landed over $1B in combined government contracts, including a $840M record deal to supply more nuclear power over 10 years.8 Constellation and Meta signed a 20-year power purchase agreement (PPA) in June and just signed another 20-year PPA with Microsoft with the intention to restart the Three Mile Island nuclear reactor.9
Notably, both companies are in XLU’s top five holdings—another reason why the broad, market-cap weighted approach to Utility companies can provide ample exposure.
How we can help you with sector education
Bigger picture, to help you and your clients understand sectors and how to invest in them, the State Street SPDR® ETF Strategy team offers plenty of resources, including:
- Sector Investing: A Powerful Portfolio Construction Tool
- Sector Business Cycle Analysis
- GICS Sector and Industry Map
By combining education with strategic guidance, you can help clients make informed decisions about adding sectors to their portfolios, while ensuring alignment with their broader financial goals.
If you have questions or want to learn more about sector investing, please contact us. And let us know if there’s a question From the Field that you’d like us to tackle in a future article.
The State Street SPDR® ETF Strategy team has the privilege of meeting regularly with financial advisors across the industry. These conversations provide a unique window into the challenges you face—and enhance our dedication to supporting you with the products and insights you need to better serve clients and grow your practice.