Should I Be Investing in Fusion Energy Stocks?
Fusion energy could very well be the answer to one of humanity’s biggest questions. Namely, how can we produce clean, sustainable energy to power the modern world? Fusion energy, the same type of energy that is produced in the Sun, could be the answer to this question. This fact alone should be enough for investors to start salivating over fusion energy stocks.
In order to create fusion energy, scientists need to create a controlled thermonuclear fusion reaction. In this reaction, two nuclei combine to form a new nucleus and produce energy in the process. There are several main benefits to fusion energy. First, it produces significantly more power than renewable sources like wind and solar and is more reliable than these sources. Second, fusion energy does not produce harmful waste like fossil fuels and nuclear energy do.
So just how big could the fusion energy market become? Well, experts at Bloomberg estimate that fusion energy could be worth around $40 trillion once the market matures. For reference, the global health industry is currently worth about $10 trillion.
From an investor perspective, buying fusion energy stocks sounds like a rare no-brainer. There’s just one problem…there aren’t many fusion energy stocks available.
The Industry is Still Private
Right now, there are about 35 fusion companies. Many of these are located in the United States. However, every single one of them is still privately owned. This means that their stock does not trade on public exchanges. The reason that none of them have gone public is rather interesting.
Companies go public in order to raise money to grow their business. However, once a company goes public, it needs to answer to shareholders. This almost always means making more money and increasing the stock’s share price. For fusion energy companies, going public would be a significant risk.
Fusion energy companies are still in the research and development stage. They are working hard to develop a breakthrough science. But, there is no telling when this breakthrough will happen. For this reason, they cannot accurately predict when they will start generating revenue and earning a profit. In other words, these companies are burning money fast.
If a fusion energy company went public, it would probably have to endure years of no revenue, no significant updates, and angry shareholders. So, instead, fusion companies raise money through private investors who understand the risks. The private market is currently the easiest way to invest in fusion energy companies.
If you are an accredited investor then you can invest through pre-IPO marketplaces like EquityZen. An accredited investor is anyone that earns over $200,000 or has $1 million in assets.
For non-accredited investors, the opportunity to buy fusion energy stocks is slim. However, I was able to find one opportunity.
Chevron Corporation (NYSE: CVX)
Chevron Corporation is one of the world’s largest energy companies. It’s also one of the successors of John D Rockefellers Standard Oil empire. In an effort to diversify its business, Chevron started the Chevron Technology Ventures investment fund. This fund invests in a portfolio of low-carbon energy resources.
In 2020, The Chevron Technology Ventures fund led a Series A investment round in Zap Energy. Zap Energy is a Seattle-based start-up developing a modular nuclear reactor using fusion. It currently has $14 million in total funding. Even though it isn’t a pure play fusion energy investment, buying Chevron stock will expose you to this investment in Zap Energy.
The president of Chevron Technology Ventures, Barbara Burger, is excited about the energy transition movement. She stated, “Our investment in Zap Energy adds to Chevron’s portfolio of companies we believe are likely to have a role in the energy transition.” The fund has 10 total investments in various breakthrough energy technologies.
Based on this investment, Chevron appears to be the only publicly-traded U.S. company with exposure to fusion energy. Most private fusion companies list the U.S. Department of Energy as their singular investor. By default, this makes Chevron one of the only fusion energy stocks that you can buy.
Of course, it’s not exactly accurate to call Chevron a fusion energy stock. Chevron’s primary business is still natural gas and oil. This core business also appears to be doing just fine by itself. In Q2 2022, this energy giant posted a revenue of $65.4 billion, up 81% from 2021. It also recorded a net income of $11.6 billion, up a staggering 277% from 2021.
So, while there aren’t many fusion energy stocks to buy, there are still a few opportunities to consider.
Preparing for Fusion Energy Stocks
Football teams will spend weeks at a time preparing to face off against an opponent. They spend hours studying the other team’s playbook, personnel and tendencies. This way, on game day, they are ready for pretty much anything the other team throws at them. The team that is better prepared almost always has a better chance of winning. This type of scenario is true across pretty much every sport and profession. It’s even true in the investment world.
Investors will spend hours trying to anticipate what might happen with different companies or industries. They will read company statements, industry reports, social media feeds and opinions from other analysts. The main goal is to be prepared for any scenario that might arise. That way, when something happens, they can respond quickly and appropriately.
This is especially true in today’s world, where one small update related to COVID-19 could send stocks either soaring or tanking.
As for fusion energy, the industry is still a long way away from being ready to hit the public markets. However, it’s still beneficial to go through the process of researching and becoming knowledgeable about the industry. This way, when a major breakthrough comes, you will be ready to make a decision at a moment’s notice and potentially get in on the ground floor.
I hope you’ve enjoyed learning about a few of the best fusion energy stocks to buy. As usual, please base all investment decisions on your own due diligence.