Day: September 20, 2024

(Reuters) -Constellation Energy and Microsoft have signed a data center deal to help resurrect a unit of the Three Mile Island nuclear plant in Pennsylvania in what would be the first-ever restart of its kind, the companies said on Friday.

Big tech has led to a sudden surge in U.S. electricity demand for data-centers needed to expand technologies like artificial intelligence and cloud computing. Nuclear energy, which is nearly carbon-free and broadly considered more reliable than energy sources like solar and wind, has become a popular option for technology company’s with uninterrupted power needs and climate pledges.

“Nuclear plants are the only energy sources that can consistently deliver on that promise,” Constellation Chief Executive Officer Joe Dominguez said in a statement.

Constellation’s shares were up 14% in early trading and have risen more than 100% so far this year.

A relaunch of Three Mile Island, which had a separate unit suffer a partial-meltdown in 1979 in one of the biggest industrial accidents in the country’s history, still requires federal, state and local approvals.

The deal would help enable a revival of Unit 1 of the five-decades-old facility in Pennsylvania that was retired in 2019 due to economic reasons. Unit 2, which had the meltdown, will not be restarted.

Constellation plans to spend about $1.6 billion to revive the plant, which it expects to come online by 2028.

Reuters first reported on the potential restart in July.

Sources told Reuters at the time that Constellation hoped it would receive federal support for Three Mile Island that was similar to what was given to the Palisades Nuclear Generating Station, which received a $1.5 billion conditional loan for a relaunch from the administration of U.S. President Joe Biden.

Under the Constellation-Microsoft deal, Microsoft will purchase energy from the restarted plant for a period of 20 years. The Three Mile Island unit will provide 835 megawatts of energy to the tech giant.

A restart is expected to be challenging, but as power demand spikes, the virtually carbon-free electricity source is seeing renewed support from tech companies.

“This agreement is a major milestone in Microsoft’s efforts to help decarbonize the grid in support of our commitment to become carbon negative,” Bobby Hollis, vice president of energy at Microsoft, said in a statement.

Microsoft has also signed a power purchase agreement with Washington-state fusion company Helion, which says the plant will be online by 2028, far earlier than many scientists say fusion will become commercial.

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Major tech executives, including ChatGPT developer OpenAI CEO Sam Altman and Microsoft co-founder Bill Gates, have touted nuclear energy as a solution to the growing power needs of data centers.

Altman has backed and is the chairman of nuclear power startup Oklo, which went public through a blank-check merger in May, while TerraPower – a startup Gates co-founded – broke ground on a nuclear facility in June.

Nuclear plants generated about 18.6% of the total electricity in the U.S. last year, according to Energy Information Administration data.

The power supply deals with A.I. data centers are also facing increased scrutiny. A similar deal between Talen Energy and Amazon signed earlier this year has been challenged by a group of electric utilities alleging it could spike costs for customers or hamper grid reliability.

Financial details of the Microsoft-Constellation deal were not disclosed. The companies declined to give more details on the agreement.

(Reporting by Laila Kearney in New York, Mrinalika Roy and Sourasis Bose in Bengaluru; additional reporting by Tim Gardner in Washington; Editing by Janane Venkatraman, Sriraj Kalluvila and Nick Zieminski)

There’s no denying most electric vehicle (EV) stocks have been lackluster performers of late — the movement simply hasn’t caught on as it was expected to just a few years back. Indeed, sales trends and feedback suggest consumers are actually losing interest in EVs, citing range and charging concerns. And those worries aren’t invalid.

This doesn’t mean EV-related companies are a bust, however. There’s still a very bright future ahead. Bloomberg predicts sales of EVs will grow at an average yearly pace of 21% over the next four years, reaching annualized sales of 30 million cars en route to 73 million vehicles in 2040. The recent headwind is mostly just the result of fading euphoria before the industry clears the last of its marketability hurdles.

With that as the backdrop, here’s a rundown of three underestimated EV stocks that could go parabolic at some point in the foreseeable future. It’s no coincidence that all three companies are developing solutions that will allow EVs to live up to their initial expectations.

1. QuantumScape

If you’re familiar with the technology of EVs at all, then you likely know the lithium-based batteries they require are a stumbling block. They degrade over time and must be replaced every few years. Those replacement batteries are not cheap, priced anywhere from $5,000 to $20,000 apiece. They’re also difficult and expensive to recycle (and not every part of these lithium batteries can be reused).

What if, however, EV batteries’ biggest drawbacks were overcome? Enter QuantumScape (NYSE: QS).

In simplest terms, QuantumScape makes better lithium-based batteries. Using a proprietary technology, it has designed a ceramic solid-state lithium battery that not only doesn’t require anodes, but remains 95% efficient (in terms of energy-storage capacity) for far longer than the typical EV batteries currently in use do. Perhaps most notably, QuantumScape’s solid-state batteries offer markedly more driving range on a single charge.

A bit of due diligence on QuantumScape raises a red flag. That is, it hasn’t yet reported any revenue. Dig deeper, though. It’s coming. The company only began delivering prototype batteries for EV manufacturers to start tinkering with in March of this year, and these prototypes still aren’t the final version of the QSE-5 battery it intends to make en masse once the technology is finalized.

Interest in its batteries is firming up, though. In July Volkswagen‘s battery company PowerCo entered an agreement allowing the carmaker to manufacture EV batteries based on QuantumScape’s impressive tech. Other automobile makers are also likely eyeing this proprietary technology, since it has the potential to make their EVs more marketable as well.

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The point is, QuantumScape’s first-ever revenue is on the horizon. That’s the sort of milestone that could light a fire under any stock.

2. Plug Power

While a better lithium-based battery could certainly give the EV industry a much-needed boost, that’s not the only way to power an automobile (aside from the current conventional, pollution-creating combustion engine). Hydrogen fuel cells can generate direct electric current that spins an electric motor too. In fact, a company called Plug Power (NASDAQ: PLUG) has already proven the idea works in automobiles.

The science is simple enough. A fuel cell’s cathode and anode chemically split a hydrogen molecule into positively and negatively charged protons and electrons, essentially becoming a battery in and of itself. And the only output from this process is heat and water.

This idea’s biggest hurdle to date has arguably been the world’s lack of understanding of it. Most everyone knows how well-proven combustion engines work, and battery-powered EVs are simple enough. But using hydrogen to create electricity? That’s a bit of a leap. There’s also the not-so-small issue of raw hydrogen not being readily available everywhere vehicles are driven.

As is always the case, though, time takes care of smart ideas. A few dozen consumer-facing hydrogen refueling stations are now up and running (mostly in California) plus many more private ones for bus and delivery-truck fleet operators.

So far Plug Power’s focus has been on everything but passenger vehicles. Large trucks and buses, industrial robotics, and aerial drones are where it’s making its biggest impact. It also provides stationary fuel cell systems that can power buildings, data centers, and factories in a pinch, or even on a permanent basis now that hydrogen is available — and in some cases cheaper than more mainstream methods of procuring electricity.

Wherever this technology’s growth awaits, Plug Power stands ready.

As for investors, they should know that this company’s revenue has been inconsistent. The company is also habitually unprofitable, with losses growing rather than shrinking. Plug Power may be at a fiscal turning point, though. Analysts are calling for a strong reversal of this year’s top-line lull, putting the company on a sustained path toward profitability. As is the case with QuantumScape, simply being on the right fiscal trajectory could be enough to reignite the stock following its three-year lull.

This might help: As of the latest look, analysts’ consensus price target of $4.06 per share is nearly twice Plug Power stock’s present price.

3. Nikola

And if you’re looking for practical, commercial uses of hydrogen fuel cells as a power source for conventional vehicles, look no further than Nikola (NASDAQ: NKLA).

You won’t be driving a Nikola vehicle anytime soon. In fact, you probably won’t be driving one at all. The company’s production is limited to class-8 trucks; you know them better as “big rigs” (the tractor part of a tractor-semitrailer). While the company makes a purely battery-powered rechargeable truck, following problems with these battery-powered haulers that forced a sweeping recall, it’s becoming clearer to the company — as well as its customers — that fuel cell-powered electric vehicles are actually the more cost-effective and reliable option. To this end, Nikola delivered 72 of these tractors in the second quarter of this year, up 80% from Q1’s figure.

The tech lends itself to this sort of heavy-duty industrial usage, anyway.

While hydrogen fuel cells are a proven means of generating clean electricity, they’re still not quite practical for the mass market, which of course requires lots of refueling infrastructure. (For perspective, there are nearly 200,000 gas stations in the U.S. alone.)

Class-8 truck fleet operators don’t necessarily need such a widely available network of refueling options, however. They often manage their own, allowing their drivers to fuel up at warehouses or dispatch centers rather than getting them tied up in traffic. Nikola is supporting the paradigm shift on this end of the business as well, launching a venture called Hyla early this year to offer refueling solutions for its hydrogen-powered class-8 rigs.

Like Plug Power and QuantumScape, Nikola is presently unprofitable. Founder Trevor Milton brought legal trouble to the table as well but is no longer involved with the company.

Look forward rather than backward, though. This company’s top line is projected to grow more than 200% this year and then repeat the feat next year as fleet owners clamor for its long-awaited solution. This will at least drive the company toward profitability.

That will still only scratch the surface of its opportunity, however. Roughly a quarter of a million of these big trucks are sold every year in the U.S. alone. More and more of them are zero-emissions vehicles that comply with continually rising emissions standards.

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3 Electric Vehicle (EV) Stocks That Could Go Parabolic was originally published by The Motley Fool

Shares of Trump Media & Technology Group slumped to their lowest level ever at the opening bell Friday, the first trading day that its biggest shareholder, former President Donald Trump, is free to sell his stake in the company behind the Truth Social platform.

Shares of Trump Media, commonly called TMTG, tumbled almost 7% to $13.73, putting the value of the company at less than $3 billion. Trump owns more than half of it.

Trump and other insiders in the company have been unable to cash in on the highly volatile stock due standard lock-up agreements that prevent big stakeholders from selling stakes for a set period after a company becomes publicly traded. TMTG began trading publicly in March.

Trump owns nearly 115 million shares of the company, according to filings with the Securities and Exchange Commission. Based on TMTG’s share price early Friday, Trump’s holdings are worth, at least on paper, about $1.6 billion. It’s usually not in the best interest of big stakeholders to even attempt to sell large tranches of their stock because it could risk a broader sell-off.

Since going public, shares in Trump Media have gyrated wildly, often depending on news related to Trump, the Republican presidential nominee.

One week ago, the company’s shares jumped nearly 12% after Trump said he wouldn’t sell shares when the lock-up period lifted. The stock dipped more than 10% following the debate earlier this month between Trump and the Democrats’ nominee, Vice President Kamala Harris. In mid-July, shares climbed more than 31% in the first day of trading following the first assassination attempt on Trump.

Trump Media & Technology Group Corp. is now worth considerably less than several months ago. When the company made its debut on the Nasdaq in March, shares hit a high of $79.38.

Truth Social came into existence after he was banned from Twitter and Facebook following the Jan. 6, 2021, Capitol riot. Based in Sarasota, Florida, Trump Media has been losing money and struggling to raise revenue. It lost nearly $58.2 million last year while generating only $4.1 million in revenue, according to regulatory filings.

By Suzanne McGee and Carolina Mandl

(Reuters) -Investment advisers are urging clients to dump hefty cash allocations now that the Federal Reserve has begun its much-anticipated interest-rate easing, a process they expect to limit the appeal of money-market funds in the coming months.

Retail investors’ assets in money market funds have grown by $951 billion since 2022, when the Fed started its rate-hiking cycle to tame inflation, according to the Investment Company Institute, which represents investment funds. Their assets stood at $2.6 trillion on Sept. 18, roughly 80% higher than at the beginning of 2022. Total money market assets stood at $6.3 trillion.

“As investors are now more convinced that the Fed will reduce rates in line with its guidance, investors will likely grasp for yields that will not dwindle overnight,” said Hannes Hofmann, head of family office group at Citi Private Bank, adding appetite for risk is likely to increase.

On Wednesday, the U.S. central bank cut the federal funds rate by a larger-than-usual 50 basis points to a range of 4.75% to 5%, which makes holding cash in deposit accounts and cash-like instruments less appealing.

“You’re going to have to shift everything … further up in the amount of risk you’re accepting,” said Jason Britton, Charleston-based founder of Reflection Asset Management, who manages or oversees around $5 billion in assets. “Money-market assets will have to become fixed-income holdings; fixed income will move into preferred stocks or dividend-paying stocks.”

Money-market funds – ultra low-risk mutual funds that invest in short-term Treasury securities and other cash proxies – are a way to gauge investor interest in the nearly risk-free returns they offer. When short-term interest rates climb, money-market returns rise with them, increasing their appeal to investors.

“Investors may need to look at something different, or longer-term, to lock in rates and not be as exposed to the Fed lowering interest rates,” said Ross Mayfield, investment strategist at Baird Wealth.

Some investors could end up transferring funds from money market funds to equities, advisers say. Daniel Morris, Chief Market Strategist, BNP Paribas Asset Management, said the appeal of money market funds will wane. Morris said he sees better opportunity in equities and is slightly overweight equities versus fixed income.

Carol Schleif, chief investment officer of BMO Family Office, expects investors to keep some cash on the sidelines to wait for opportunities to buy stocks.

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It could take a while for initial reactions to the Fed’s decision on Wednesday to show up in money-market fund flows, as it has been tough to persuade retail investors to abandon their cash holdings, analysts note. Assets in money market funds tend to peak nine months after the first rate cut, BofA Securities said in a report.

“If people see a broader-based advance in stocks, they may move out of cash more quickly, as that would point to owning riskier assets as a good thing,” said Christian Salomone, chief investment officer of Ballast Rock Private Wealth.

Investors “are stuck between a rock and a hard place,” Britton said, faced with a choice between investing in riskier assets or earning a smaller return from cash-like products.

(Reporting by Suzanne McGee and Carolina Mandl; additional reporting by Davide Barbuscia; editing by Megan Davies, Rod Nickel and Nick Zieminski)

The recent drop in mortgage rates hasn’t sparked the homebuying surge many industry experts anticipated. Instead, potential buyers are holding firm, contributing to what some analysts are calling a “buyer strike” in the housing market.

Nick Gerli, CEO of Reventure Consulting, has been monitoring the trend. In a recent YouTube poll conducted by Gerli, an overwhelming 91% of 5,000 respondents indicated that lower mortgage rates wouldn’t increase their likelihood of purchasing a home.

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Gerli noted that sentiment is echoed in broader market data. The University of Michigan’s survey on homebuying sentiment reached a record low in July, with 87% of Americans saying it’s a bad time to buy a home. The figure surpasses the pessimism seen during the early 1980s when mortgage rates peaked at 18%.

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“We’re dealing with unprecedented negative sentiment around the housing market,” Gerli said on X (formerly Twitter) last week. He noted that the long-term average of those viewing it as a bad time to buy is typically around 31%.

The reluctance of buyers persists despite the median U.S. monthly housing payment falling to $2,558, a 1.3% decrease from last year, according to recent data from Redfin.

Central to the standoff is the issue of home prices. The median U.S. home sale price stands at $388,085, up 3.7% from the previous year and just below the all-time high set in July, Redfin noted. That price resilience, partly due to limited inventory, has created a deadlock between buyers and sellers.

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Gerli points to historical data showing that the current market represents the largest housing bubble in 134 years when adjusting for inflation. “From 1890 to 1990, inflation-adjusted home prices never breached more than 20% above the long-term norm,” Gerli explained. “Everything changed in the 2000s. What changed was Federal Reserve manipulation of interest rates and money printing.”

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Years of low interest rates and quantitative easing following the 2008 financial crisis and the pandemic created conditions for home prices to surge. Now, with monetary tightening having been in effect for some time, the market is paying for it, Gerli said.

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Sellers are sitting on substantial equity – an estimated $32 trillion as of 2024, more than double the peak of the 2006 bubble, the Reventure CEO said. That cushion has made many reluctant to lower prices. Buyers, on the other hand, view current valuations as inflated and unsustainable.

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The possibility of a recession adds another layer of uncertainty. A sharp rise in unemployment could trigger forced selling and potentially lead to substantial price declines. Gerli highlighted the historical correlation between unemployment rates and mortgage defaults, suggesting a potential increase in housing inventory that many economists may be overlooking.

It’s “easier for sellers to simply give up equity, prices to drop 20% and the market to rebalance,” Gerli said. However, he acknowledged that seller psychology makes such a straightforward resolution unlikely in the short term.

For now, the housing market remains in a state of tension, with traditional models struggling to predict its next move.

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This article Mortgage Rates Drop, But Homebuyers Still Say ‘No Thanks’– Here’s What’s Really Behind The Buyer Strike originally appeared on Benzinga.com

© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

What Happened:

Shares of cybersecurity company CrowdStrike (NASDAQ:CRWD) jumped 5.9% in the morning session as markets roared back after an initially muted response to the Fed’s rate cut, which sparked a renewed appetite for risk assets. While investors were expecting a reduction in rates from the US central bank, there was a bit of back and forth on whether the cut would be 25bps (a quarter percent) or 50bps (half a percent).

The Fed ended up slashing its policy rate by 50bps (0.5%) to 4.75%-5.00%. This marks the first rate reduction in roughly four years. As a reminder, the Fed—under Chair Jerome Powell—began raising rates to tackle inflation coming out of the COVID-19 pandemic when a confluence of supply chain disruptions, labor shortages, and stimulus spending caused inflation to run hot.

Looking forward, the Fed signaled that more cuts are possible in 2024/25. Putting it all together, the announcement and outlook provided a breath of fresh air and a clearer view of the Fed’s monetary policy stance, which the market has been waiting for with bated breath. If there’s anything the market doesn’t like, it’s uncertainty.

The driver of a stock’s value is the sum of its future cash flows discounted back to today. The result of lower interest rates, all else equal, is higher stock valuations. This is especially true for higher-growth stocks such as those in the technology sector, where the current value depends more on cash flows many years out in the future.

As a reminder, a software update on the company’s Falcon platform was the culprit behind a global outage in July 2024 that canceled flights, made hospital appointments vanish, and prevented TV broadcasters from going on air to talk about the outage. The stock fell precipitously afterward as the market debated whether the flawed update and ensuring outage would cause irreparable harm to the company and its brand. Thus far, it seems like the damage has been limited. Still, the market is trying to figure out the right price for this asset, which is a leader in its space, growing quickly and profitable, but not immune to hiccups.

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What is the market telling us:

CrowdStrike’s shares are very volatile and over the last year have had 14 moves greater than 5%. In context of that, today’s move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 21 days ago, when the stock gained 5.8% on the news that the company reported second-quarter earnings results. The quarter itself was solid, with ARR (annual recurring revenue), revenue, and operating profit all beating. With the stock going from nearly $380 in mid-July to $265 due to the massive outage from a flawed CrowdStrike Falcon update on Windows machines that wreaked havoc on airlines, hospitals, and other important parts of the global economy, the market feared that numbers could look quite bad in the near-term. Interestingly, the company provided positive updates. These include 1) Multiple large deals (7-, 8-, and even a 9-figure deal) closed after the incident; 2) Gross retention rates over the trailing 5 weeks up year on year; and 3) The CNAPP (Cloud-Native Application Protection Platform), SIEM (Security information and event management), and identity modules collectively surpassed $1B ARR.

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Moving on, guidance was underwhelming, though, as full-year revenue was lowered and revenue guidance for next quarter missed Wall Street’s estimates. However, this seems ‘better than feared. These results prove that while there are headwinds from the outage, the headwinds aren’t so bad (for the time being).

CrowdStrike is up 14.8% since the beginning of the year, but at $283.82 per share it is still trading 27.6% below its 52-week high of $392.15 from June 2024. Investors who bought $1,000 worth of CrowdStrike’s shares 5 years ago would now be looking at an investment worth $4,119.

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