The ASX uranium share sector has seen significant declines in the last several months. While this may be worrying some investors, experts view this is as a buying opportunity for an industry that has an exciting future.
Since May 2024, the Paladin Energy Ltd (ASX: PDN) share price has declined 54% and the Boss Energy Ltd (ASX: BOE) share price has sunk 46%.
Just because something has gone down doesn't mean it's going to bounce back straight away. But, when it comes to resources, there is certainly volatility and the potential for a recovery if/when conditions improve.
How do we know if things will get better?
Reporting by the Australian Financial Review on comments by Tribeca Investment Partners' Guy Keller has revealed some useful pieces of advice about the nuclear energy sector.
Chinese AI service DeepSeek unsettles investors
It was noted that ASX uranium shares Boss Energy and Paladin Energy both fell approximately 10% on one day following claims that the Chinese AI service DeepSeek was created for significantly less cost and much-reduced computing power compared to OpenAI.
What does Chinese AI have to do with uranium mining? The suggestion is that more efficient AI could mean less power demand, which could then mean less uranium needed to fuel the new nuclear reactors being developed by Alphabet and Amazon to feed the industry's fast-growing energy demand.
The investment manager Keller was not fazed by the development. He said:
It surprised me the ferocity of the sell-down in uranium names. My first reaction was buying a dip because I've got very little data centre uranium demand in my models at the moment.
The reality is: I don't need AI demand because I've got a supply deficit coming with the existing 438 operating reactors. And when the 20 gigawatts that's idled in Japan and Ukraine come back on I've got an even bigger deficit.
In fact, the Tribeca Investment Partners expert suggested that a change in the energy demand profile of AI for each enquiry could lead to more demand rather than less. Keller said:
If you don't know the answer, the knee-jerk move is to sell. But since then, people are realising the actual second derivative for electricity supply is that there could actually be more demand.
More efficiency could lead to more uptake, rather than lowering demand, according to the expert.
Why volatility doesn't need to be scary
Keller suggested that institutions are buying and selling ASX uranium share names like Boss and Paladin based on limited bits of new information, or changes in the New York-traded uranium nuclear spot (current) price.
But, he doesn't think ASX investors should pay attention to the spot price, calling it a "dysfunctional" physical market because there's a "really small number of people globally trading the spot price."
The fund manager also suggested that short sellers are focused on uranium miners, but he believes those shorts are a "very vulnerable target" if conditions turn around.
Keller is not put off by the short-term pain and suggested the sector has a compelling long-term future. He concluded:
There's not too many places to hide when this goes wrong, but over the medium to long term, we truly believe this is a going to be something big.
