Fusion Coin: A Viable Investment Option For Us Investors?

Nuclear fusion could be a huge investment opportunity, but it's a risky one. While nuclear fusion has been researched for nearly a century, it is still a long way from commercial viability. However, recent advances and the push for a zero-carbon economy have led to an explosion of interest from companies seeking to develop reliable alternative energy sources.

There are currently no publicly traded companies that operate fusion reactors, because no commercial fusion reactors exist yet. However, there are a few ways US investors can gain exposure to the sector. One way is to invest in publicly traded companies that have themselves invested in fusion companies, such as Alphabet (GOOG) and Amazon (AMZN). Another way is to invest in firms that can benefit from the results of fusion, namely cheap and abundant energy. A third way is to invest in energy companies, such as Chevron (CVX), or utilities that run power plants, like Duke (DUK) or National Grid (NGG). Finally, investors can also consider side-investing in nuclear fusion by seeking out companies that produce deuterium gas or desalinization companies, as hydrogen isotopes are generally produced from water.

Investing in fusion companies

Nuclear fusion has been touted as the next big thing in clean energy, with the potential to produce large quantities of energy without any harmful greenhouse gas emissions. While nuclear fusion technology is still in its early stages, it has attracted significant interest from investors who recognise its potential as a game-changer in the energy sector.

However, investing in fusion companies comes with its own set of challenges and risks. Here are some things to keep in mind if you're considering investing in this innovative field:

The Current Landscape of Fusion Companies

Private companies have been leading the way in fusion technology development, with a significant amount of funding coming from private equity and venture capital funds. As of February 2024, nuclear fusion companies had collectively attracted US$6.21 billion in funding, according to the Fusion Industry Association.

Some of the most prominent private fusion companies include:

• Commonwealth Fusion Systems (CFS): A spin-out from the Massachusetts Institute of Technology, CFS has raised over US$2 billion in funding and aims to bring a commercial fusion power plant to market by the early 2030s.
• TAE Technologies: With US$1.2 billion in funding, TAE Technologies is working to commercialise fusion reactors by the early 2030s. The company has key collaborators like Google and General Atomics.
• Shine Technologies: This company has raised over US$700 million in funding and is focused on commercialising fusion technology for industrial, defence, and healthcare applications.
• Helion Energy: Backed by OpenAI's Sam Altman, Helion Energy has raised US$577 million in funding and is building what it claims will be the world's first fusion power plant.
• General Fusion: With US$300 million in funding, General Fusion is working to bring Magnetized Target Fusion technology to market, with plans for its first commercial power plant in the UK by the 2030s.

Publicly Traded Companies with Exposure to Fusion

While there are currently no pure-play nuclear fusion stocks, several publicly traded companies have made investments in private fusion technology companies. These include:

• Chevron (NYSE:CVX): Chevron is one of the world's largest oil and gas companies and has made significant investments in the transition to renewable energy. The company has invested US$250 million in TAE Technologies and an undisclosed amount in Zap Energy.
• Alphabet (NASDAQ:GOOGL): Alphabet, the parent company of Google, has collaborated with TAE Technologies since 2014 and invested US$250 million in the company in 2022. Alphabet's machine learning expertise is expected to play a key role in advancing fusion research.
• Cenovus Energy (TSX:CVE, NYSE:CVE): Cenovus Energy is a Canadian oil and gas company that has been investing in General Fusion since 2014, including a US$4 million investment in 2021.
• Eni (NYSE:ENI): Eni is an Italian oil and gas company that was an early investor in Commonwealth Fusion Systems. Eni has signed a deal with CFS to accelerate the commercialisation of fusion technology and plans to launch a nuclear fusion power facility by the early 2030s.

Risks and Challenges of Investing in Fusion

Investing in fusion technology comes with a unique set of risks and challenges. Fusion technology is still in its infancy and is not expected to be commercially viable for at least a few decades. As a result, investors should be prepared for a long-term investment horizon and the possibility of technological setbacks.

Additionally, the engineering challenges associated with fusion technology are significant, including the need to heat fuel to extremely high temperatures and the requirement for specialised infrastructure. These challenges contribute to the high costs of developing fusion technology, and there is no guarantee that these challenges will be overcome in a timely manner.

Final Thoughts

Investing in fusion through materials

Nuclear fusion is a potentially revolutionary technology that could be a huge investment opportunity. However, it is still a nascent technology that is a long way from commercial viability. While there are limited options for investing in nuclear fusion companies directly, investors can consider side-investing in companies that produce the materials and components required for fusion reactors.

The fuel source for nuclear fusion is a mix of hydrogen isotopes called deuterium and tritium. Deuterium can be obtained from seawater, while tritium is derived from lithium. As an investor, you can consider seeking out companies that produce deuterium gas or lithium. Keep in mind that tritium is not yet produced in commercial quantities.

In addition to fuel sources, nuclear fusion reactors will require specialized materials and components for their construction. While the specific composition of a working fusion reactor is not yet known, it is likely that superconducting materials will play a crucial role in the core of the electromagnets that contain the fusion reaction. Companies that produce materials such as mercury, titanium, niobium alloys, and next-generation ceramics are potential long-term suppliers for fusion reactor cores.

It is important to note that investing in any emerging industry, such as nuclear fusion, carries a higher level of risk. Investors should carefully consider their risk tolerance and conduct thorough research before making any investment decisions.

Investing in energy companies

The energy sector is a crucial component of the global economy, generating and supplying the fuel and electricity needed to sustain economic activities. For investors, this sector offers a range of opportunities, from traditional oil and gas companies to those focused on renewable energy sources.

Types of Energy Stocks:

• Oil and Natural Gas Stocks: These companies explore, extract, process, and supply oil and natural gas, forming the largest share of energy stocks by market capitalisation.
• Pipeline and Refining Stocks: These companies are involved in refining crude oil into usable products and transporting energy products through pipelines.
• Mining Stocks: Coal and uranium mining companies fall under this category, providing fuel for energy generation.
• Renewable Energy Stocks: This includes companies focused on green energy sources like solar, wind, hydroelectric, and geothermal power.

Factors to Consider:

When investing in energy companies, it is essential to consider the following:

• Market Size and Growth Potential: The energy sector is valued at around $6 trillion globally, with growing demand from developing countries.
• Dividends and Company Growth: Higher energy prices can lead to increased profits for energy companies, allowing them to pay higher dividends or reinvest in growth.
• Environmental and Regulatory Risks: The shift towards renewable energy sources and increasing environmental concerns pose risks to traditional energy companies.
• Volatility and Market Fluctuations: Energy prices can be volatile, impacting the value of energy stocks. Diversification and a long-term perspective are crucial when investing in this sector.
• Innovation and Technology: Advances in technology, such as high-performance computing and additive manufacturing, can accelerate the development of fusion technology and other energy innovations.

Examples of Energy Companies:

• Brookfield Renewable: A leading global renewable energy producer with assets in hydroelectric, solar, and wind power.
• Chevron: A global energy company with a diverse range of businesses, including exploration, production, refining, and marketing.
• Enbridge: One of the largest energy infrastructure companies in North America, specialising in pipelines and renewable energy.
• ExxonMobil: The largest non-government-owned energy company in the world, focusing on oil and natural gas exploration, production, and trade.
• General Fusion: A Canadian company backed by Cenovus Energy, developing magnetised target fusion technology for zero-carbon energy by the 2030s.
• TAE Technologies: A nuclear fusion company with investments from Chevron, Alphabet, and the US Department of Energy, aiming for commercial-scale fusion energy by the early 2030s.

Final Thoughts:

Fusion's potential as a clean energy source

Fusion has the potential to be a clean, safe, and abundant energy source. It is a proposed form of power generation that would generate electricity by using heat from nuclear fusion reactions. In a fusion process, two lighter atomic nuclei combine to form a heavier nucleus, releasing energy. This process can create a near-limitless source of low-carbon energy, producing nearly four million times more energy per kilogram of fuel than burning coal, oil, or gas.

Fusion power has several advantages over nuclear fission. It produces reduced radioactivity, little high-level nuclear waste, and increased safety. It also has ample fuel supplies, as its fuel (primarily deuterium) exists abundantly in the ocean. About 1 in 6500 hydrogen atoms in seawater is deuterium. Fusion power could also be used for propulsion within the solar system and for interstellar space exploration.

However, fusion power also has some disadvantages. It shares some drawbacks with fission reactors, such as the production of large amounts of radioactive waste and radiation damage to reactor components. Additionally, fusion reactions require intense heat and pressure, and no known material can withstand such extreme conditions. Another challenge is the need for materials that can withstand the tough treatment they will receive from the fusing plasma, as well as the intense neutron bombardment.

Despite these challenges, fusion has the potential to be a game-changing clean energy source. Researchers are working on new projects to speed up its development, and some experts believe it could become a significant source of power by 2050 or 2060.

The challenges of investing in fusion

Nuclear fusion has been described as "only slightly less difficult" than creating energy from fusion itself. While nuclear fusion could be a huge investment opportunity, it is also very risky. Here are some of the challenges of investing in fusion:

• Limited investment options: Despite the excitement around nuclear fusion, there are currently limited options for investing in fusion companies. Pure-play nuclear fusion stocks are not yet available, and investors must look towards private equity funds, venture funds, or publicly traded companies that are positioned to benefit from fusion technology or are investing in private fusion companies.
• Commercial viability: Fusion technology is still in its early stages and is not yet commercially viable. Investors need to be aware that it could be a long time before fusion technology becomes profitable, and there are many engineering challenges that need to be overcome before it can be used for industrial-scale power generation.
• Long timelines: Fusion is a nascent technology with long timelines for development and returns on investment. This is a challenge for typical venture capital funds, which operate on a 10-year timeline. Investors need to be prepared for the possibility of a hype cycle, where initial optimism is followed by disappointment if breakthroughs don't occur quickly enough.
• Regulatory and safety issues: Fusion technology is subject to regulatory and safety issues, which can slow down development and increase costs. While fusion is currently considered "regulatory light", this may change as the industry grows and more stringent requirements are put in place.
• Technical challenges: Fusion technology faces significant technical challenges, such as the need to heat fuel to extremely high temperatures and the requirement for complex reactor designs. These challenges can increase costs and slow down the development and commercialisation of fusion power plants.
• Competition and uncertainty: There are multiple approaches to fusion technology, and it is uncertain which method will ultimately prove to be the most successful. Investors need to be prepared for the possibility that their chosen technology may not be the one that achieves commercial success.
• Scalability: While fusion has the potential to scale rapidly once it is successfully commercialised, getting to that point is a challenge. The fusion industry needs to navigate engineering, regulatory, and supply chain hurdles before it can achieve widespread adoption and make a significant impact on the energy sector.

Frequently asked questions