Market Round-Up

Uranium prices have reached their highest level since the 2011 Fukushima disaster, driven by rising demand and a slow response in supply. The chemical element now stands at US$65.50 per pound, edging closer to the 2011 peak of US$73. Nuclear power generation growth has been relatively small over the past decade, with worldwide generation only reaching pre-Fukushima levels in 2018 as nations including Japan and Germany decommissioned their nuclear powerplants over safety concerns. However, a shift in the economic and geopolitical landscapes over the past couple of years has led to an inflection point as nations seek greater energy independence and strive to decarbonise their economies, utilising nuclear power as a reliable carbon-free baseload energy source.

The Organisation for Economic Co-operation and Development (OECD) International Energy Agency estimates that nuclear capacity is set to grow by 43% between 2020 and 2050, with China and India spearheading this development in a bid to meet their rising energy demands. Global uranium supply is struggling to keep up after years of scarce investments in production, as previously low prices forced miners to scale back output, causing an asymmetry between demand and supply. According to the World Nuclear Association, the price is projected to soon surpass the 2011 peak price with expectations that demand will increase incrementally, eventually doubling to an annual figure of 130,000 tonnes by 2040. However, there is likely to be a time lag before the price rises filter through to nuclear producers, as the majority of uranium is traded on long-term contracts.

British chip designer, Arm Holdings (Arm), debuted on Nasdaq on 14th September. The SoftBank-owned company received a pre-listing valuation of US$54.5bn in its initial public offering (IPO) with the price per share coming in at US$51. Arm Holdings ended its first trading day at a price of US$63.59, representing a 25% daily increase. SoftBank’s ability to convince key Arm customers, such as Intel and Nvidia, into becoming cornerstone investors helped generate a stable price floor and induced further outside interest, with reports that Arm’s IPO was more than five times oversubscribed prior to the official listing.

The strong IPO performance highlights investor appetite for technology companies, especially those that can contribute to AI (artificial intelligence) development. Arm is well positioned to be a key player in the implementation of more sophisticated AI systems into mobile devices as it holds a virtual monopoly on mobile phone chip designs. The question now is whether Arm can sustain its momentum going forward and if other companies planning to do an IPO, such as Instacart and Birkenstock, can replicate this initial success.

Please note that this communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned. Investments and income arising from them can fall as well as rise in value. Past performance and forecasts are not reliable indicators of future results and performance.