While the name Kokura may not ring a bell for many in the West, it surfaced recently following Microsoft’s announcement to revitalize the Three Mile Island nuclear plant. This move aims to support the increasing electricity demands driven by the rise of artificial intelligence (AI). Located along Pennsylvania’s Susquehanna River, Three Mile Island is infamously known for being the site of the United States’ most severe nuclear incident in 1979, which, although not fatal, incurred cleanup costs of approximately $2 billion when adjusted for inflation.

In a bold step forward, Microsoft entered into a 20-year agreement with Constellation, a carbon-free energy group, to purchase the entire 800 megawatts of power the nuclear facility will generate. Following the announcement, Constellation’s stock surged by 22%, bringing its total market value to $80 billion (£60 billion).

The surge in demand for electricity, particularly from AI and data centers that facilitate cloud computing, has led Microsoft to conclude that nuclear energy is essential for achieving its goal of carbon neutrality by 2030. Bobby Hollis, Microsoft’s vice president of energy, highlighted the significance of the agreement, stating it represents a major advancement in the company’s aspirations to decarbonize the power grid.

Echoing this sentiment, Constellation’s CEO, Joe Dominguez, remarked that this decision symbolizes the resurgence of nuclear power as a clean and dependable energy source.

In a separate development, last Monday, a coalition of 14 leading global banks, including Bank of America, Barclays, Citi, and Goldman Sachs, endorsed a strategy formulated at the Cop28 climate conference aimed at tripling the world’s nuclear energy output by the year 2050.

As economic and environmental strategies converge, individual investors are paying close attention to these pivotal developments. Microsoft ranks as one of my top shareholdings; I acquired shares for $233 in January of the previous year, and they are currently valued at $428.

On the other side of the Three Mile Island agreement, Constellation is also a significant asset within the Ecofin Global Utilities and Infrastructure (EGL) investment trust, where it ranks as my 11th largest holding. My original investment in Ecofin Water and Power Opportunities (EWPO) in 2011, when shares were priced at £1.22, now trades at £1.90, supported by a dividend yield of 4.2%, which has seen an average annual increase of 4% over the past five years.

Should more corporations and countries ease concerns about nuclear energy’s safety, smaller shares in my portfolio may also experience noteworthy effects. The longstanding apprehensions stemming from the Chernobyl disaster in 1986 and the Fukushima disaster in 2011 continue to loom large over public perception of nuclear technology.

Nonetheless, as energy remains a cornerstone of the economy, abandoning essential sources isn’t feasible. For instance, after the Fukushima incident, Germany made the controversial decision to shutter all nuclear facilities and relied instead on Russian liquefied natural gas (LNG) until geopolitical tensions arose.

Proponents argue that nuclear energy is indispensable for maintaining warmth and job security, especially if nations adhere to their COP28 commitments to curtail reliance on coal, oil, and LNG. Renewable sources like solar and wind face limitations during periods of low sunlight and calm weather, termed dunkelflauten in German.

Yellow Cake (YCA), a Jersey-based firm, embodies the controversies surrounding nuclear energy. It possesses over 20 million pounds of uranium, stockpiled in Canada and France, which is vital for nuclear power generation—colloquially referred to as yellow cake due to its oxide form (U₃O₈). My initial investment at £4.86 last September saw highs of £7.49 in January before settling at £5.76; further growth is anticipated as countries prioritize energy self-sufficiency through renewables.

An example of innovation toward sustainability is UPM-Kymmene (UPM), a Finnish forestry firm transitioning from paper production to biofuels by utilizing lignin from trees as a substitute for oil in plastics production.

UPM’s investment in Europe’s largest nuclear power plant on Olkiluoto Island has contributed to a diversified portfolio, with shares trading at €30, up from the €29.70 purchase price last August, while also offering a 5.1% dividend yield.

Critics indicate that nuclear energy isn’t entirely carbon-free due to the emissions produced in constructing power plants and the associated cleanup expenses. However, countries and companies, including those that committed to the Cop28 climate goals, generally agree that nuclear fission is essential to the energy landscape.

As we consider the future of energy production, it’s worth remembering the historical context of places like Kokura, which narrowly avoided destruction during World War II when clouds obscured its location from a bomber’s target. If the global community does shift towards nuclear energy for peaceful purposes, we can only hope for favorable outcomes similar to Kokura’s fortunate escape.

The Triumph of Experience Over Hope

A classic investment text titled The Triumph of the Optimists illustrates how investors are often rewarded for embracing risks and anticipating brighter futures. Analysis of data over extended periods across various markets serves as a reminder against the pervasive negativity found in much of social media.

However, there are exceptions to the general upward trajectory of equities, and a recent personal experience highlights this. The Gulf Investment Fund (GIF) has succumbed to the ongoing turmoil in the Middle East, leading to its management’s decision to dissolve the fund after a failed tender offer prompted many investors to exit. This is particularly disheartening, as GIF was the leading performer in its sector over the past decade, boasting total returns of 128% and 122% over the last five years.

My investment at £1.38 per share back in February 2022 has since yielded a trading price of £1.73 as the fund approaches closure before year-end. Although this decline can be classified as relatively minor, it serves as a reminder that not all investment narratives conclude positively. As director Billy Wilder once elucidated through his family’s painful history, ‘In the 1930s the pessimists went to Hollywood and the optimists went to Auschwitz.’