The Canadian Investor - Why Tech Giants Are Betting Big on Nuclear Power

Episode Date: November 4, 2024

In this episode of the Canadian Investor Podcast we explore EY’s resignation as the Super Micro’s auditor. Why explain why this raises major concerns, especially when combined with a DOJ investigation and Hindenburg’s short report alleging accounting irregularities. Simon gives a breakdown of Super Micro’s impressive AI-fueled stock performance, followed by a stark analysis of the serious red flags that emerged. We’ll discuss why this situation should make investors very cautious and the broader implications of such red flags. Next, Braden taps into his chemical engineering background to demystify nuclear power and explain why the technology is key for human kind’s ever growing energy needs. With tech giants like Amazon, Microsoft, and Google betting on nuclear to meet massive AI-driven energy demands, we break down how nuclear reactors work, Canada’s leading role in nuclear innovation, and the emerging potential of Small Modular Reactors (SMRs). Are SMRs the future of clean energy, or are they still too costly and slow to deploy? Tickers of stocks discussed: SMCI Hindenburg Research SMCI report Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Web player - The Canadian Real Estate Investor Sign up for Finchat.io for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

Welcome back into the show. This is the Canadian Investor Podcast, made possible by our friends and show sponsor, EQ Bank, which helps Canadians make bank with high interest and no fees on everyday banking. We also love their savings and investment products like GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs on a regular basis to set money aside for personal income taxes in April of every year. Their GICs are perfect because the interest rate is guaranteed, and I know I won't be able to touch that money until I need it for tax time. Whether you're looking to set some money aside for a rainy day or a big purchase is

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca forward slash GIC. Again, eqbank.ca forward slash GIC. This is the Canadian Investor, where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Brayden Dennis and Simon Belanger. The Canadian Investor Podcast. Welcome to the show. My name is Brayden Dennis, as always joined by the wonderful Simon Belanger. Dude, we haven't recorded an episode in a little bit. I've been bouncing around conferences in the u.s i was in utah california

vegas that kind of thing and you're like what's what's going on with this new look but i don't think you you've seen really yet because i wear these headphones you can't see no i was asking if you were growing a mustache for november but you're like i'm growing something else i suck at growing facial hair but you can't see these headphones, but look at this. Looking good, yeah. You look like you could play in the NHL in the late 1980s, early 1990s. Buddy, it's Zoom business on the front, and mullet coming out the back. It's in right now, dude.

Think about it. Business in the front, party in the back. Couldn't be more applicable to a Zoom first business world. No one could see. No one could see the back. Dude, it's been a while. So let's do a game. You know how I like to do these. A friend asked me how many tickers I think I could name correctly with the company name. At first, my thought was like easily 500 plus because of FinChat, my business is literally mapping public company financial data. But damn, there's so many random industrial companies in the S&P 500. I don't think I'd be able to recall as many as I think I could. How many do you think you could get? I don't know.

I'd probably do like 25, 30. I'm sure I would know more, but I'd get one letter of the ticker wrong or something like that. Plus, like we were talking before starting recording, I didn't get much sleep last night, so it's probably the wrong day to ask me to get some tickers. Hey, dude, we're going gonna keep you on your toes i have 15 here for you okay we'll see how you do some of them are easy yeah some of them are harder there's no judgments here okay pod yeah because i know some people on the podcast listening are like they know they know the

answer and they're like screaming i'm not gonna be good it's this coca-cola wow i think it's coke yeah no it's ko ko i haven't looked at coca-cola in a long time it's not starting well okay how about this toyota tyto nope no. Okay. How about this one? Barrick Gold. I think it's ABX on the TSX and Gold in the US. Gold on the US. That's right. I think it's ABX on the TSX though.

Here's one that I always mess up. American Express. Oh, it's AXP. a XP correct good what TMX group as the owner X yes X on the TSX that's good one what is X on the US exchange is it anything the PayPal maybe no they used to be back then it's people like you like yeah I don't think that they're Oh United States Steel Corporation okay and for those thinking what was I thinking with PayPal and X like back in the day XCOM what was the PayPal and Danny it was close to Elon's like you know he loved the X at brand and I think he paid

PayPal to get it back and that's that's right yeah because they own the domain blackrock i think it's blk correct all right here's a hard one it's a it's a mega cap company but broadcom oh yeah i don't remember that one um yeah yes not i looked at it not too long ago but i know i remember thinking like oh yeah like that's a weird ticker i cannot remember yeah it's avgo oh yeah memory serves correctly all right restaurant brands international awesome ticker rbi i think yeah or qsr qsr qsr that's right quick serve ups uh i think yeah wow that's uh is it just ups like it is i wanted to try yeah i wanted to give you one that was literally just the name and uh let's round it off here with cibc at cm cm that's the one i always forget though because it's like the other tickers feel easy and didn't do as bad as i thought i started off badly but uh you you did you did sell it so uh just a fun little game i like i

want to go through the entire companies by market cap and just see how many i could rifle off i feel like i could probably do a couple hundred all right simone your first topic is about something that's been in the news a little bit about some mishaps with auditing, accounting, some red flags. And then I am going to do kind of a full breakdown, very high level. I'm going to keep it easy for people who don't know the topic or just listening in their car and keep it easy about nuclear power, because this has been a topic that's also been in the news. I come from this world. I have a chemical engineering background. There's a lot of people talking about nuclear who I know don't know anything about nuclear right now. So I just kind of wanted to do a little segment about it as

well. No, it's great. I mean, I listened to uh quite a few people that know about the topic one of them being doomberg who's like really you know very credible on the subject couple uh other well-known people and um it's in super interesting of course it kind of i understand i would say maybe half of it the other half about all the process the chemical uh you know it's not a bit beyond my understanding, but I find it fascinating. So looking forward to that. I'll keep it at a... Fifth graders, probably not fair,

but I'll keep it at like high school level. No, that's good. So yeah, so as you alluded, so EY, which is one of the big four auditing firms, resigned as the Supermicro auditors. So Supermicro, before I start, I think we may have mentioned them a couple times on the podcast. We haven't talked about them all that much. But Supermicro, just to let people know what they do, they design and manufacture high performance servers and storage solution. So their products caters to various industries, including enterprise data

center, cloud computing, and AI. Supermicro can actually be an alternative for companies who would rather own their own AI infrastructure over using services offered by hyperscalers like AWS, Google Cloud, Microsoft, for example. Some company will decide to do kind of a hybrid model as well so that's kind of an overview anything you want to add or that's a good overview of super micro i actually don't know the business oh you don't know okay so there you go i just saw it as like one of those lower quality ai stocks getting blown up and it went the stock price went absolutely parabolic for a little bit. And I saw a bunch of red flag, yellow flag accounting actually flagged by my friend who has a startup in Toronto that uses AI to parse through filings and accounting statements.

That's interesting. And they're being referenced in a bunch of actual legal documents as being the first people that uncovered it. So pretty cool. No, that's pretty cool. Yeah. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now.

Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today

and keep more of your money. Visit questrade.com for details. That is questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some

extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. So not so long ago, self-directed investors caught wind of the power of low-cost index investing. Once just a secret for the personal finance gurus is now common knowledge for Canadians, and we are better for it. When BMO ETFs reached out to work with the podcast, I honestly was not prepared for what I was about to see because the lineup of ETFs has everything I was looking for. Low fees, an incredibly robust suite, and truly something for every investor. And here we are with this iconic Canadian brand in the asset management world, while folks online are regularly discussing and buying ETF tickers from asset managers in the US.

Let's just look at ZEQT, for example, the BMO All Equity ETF. One single ETF, you get globally diversified equities. So easy way for Canadians to get global stock exposure with one ticker. Keeps it simple, yet incredibly low cost and effective. Very impressed with what BMO has built in their ETF business. And if you are an index investor and haven't checked out their listings, I highly recommend it. I bet you'll be as pleasantly surprised as I was that BMO, the Canadian bank, is delivering these amazing ETF products. Please check out the link in the description of today's episode for full disclaimers and more information. So essentially, I mean, this is not so...

so essentially i mean this is not so i'll kind of give some context here and what to make of it when an auditor resigns as you know as um the auditor for a company which is not very frequent and this is not like the first time that some of these concern are raised and obviously uh you said one of your friends with that ai startup now how, let's just look at how Supermicro has done. They've done pretty well, I would say, in terms of looking at the performance before this all happened. Their ticker here is SMCI. For those who want to look up the ticker while we're talking, I will also add it to the show notes like we always do. Now, it's done well. It had been amazing returns. It was obviously being fueled by AI demand, but also investor

wanting to invest in AI related stocks. I mean, we've talked about that time and time again. There's, you know, a lot of hype around some AI stocks, not all of them, but I would say more that especially the picks and shovels right now. Like, is that, do you agree with that statement? Kind of the picks and shovels, a lot of hype around that? Yeah, like in terms of financially, what's happened so far is you have the hyperscalers bending over backwards to spend as much as they can on this technology and have the most advanced technology on their racks in their data centers. And those infrastructure companies, like the designers like NVIDIA, or the full stack, the applied materials, the TSMCs, the ASMLs, really benefiting and capturing

all of the cadence designs. The infrastructure and the software around it are really capturing all the unit economics and all the application layers and stuff like that. Like investors are going, show me the money. So I would say right now, a lot of the unit economics, yes, have flown into those companies as you've suggested. Yeah. And I guess for people wanting to understand a bit more Supermicro too, like a competitor, but they do offer more than Supermicro does and other products. But Dell would be an obvious competitor to Supermicro because they do offer some AI enterprise solutions, which is a big bulk of what Supermicro offers as well. And since the beginning of 2023, and the reason I use early 2023, we can just rewind back time and remember that Chad GPT, which really kind of started this whole hype cycle as well.

And investment, obviously, it's not just all hype. I want to be fair there. But it was launched in November of 2022, if I remember correctly. And since then, the stock essentially has done 380% up until July of this year. The reason, like I said, I used the start of 2023 was to kind of capture a lot of that upside that happened since. Now, the stock peaked in March, and at that point, it was up more than 830% since the start of 2023. So if you were one of those people that put some money in Supermicro, ended up selling in March, like, congratulations. Like, you did some phenomenal returns. But obviously...

It's truly a straight line up type of chart. Yeah. Oh, yeah, it was. And Dan Camp was telling me, like, you know, he goes on Blossom quite a bit, by the way, a sponsor of the podcast, a great sponsor. They've been with us for a while. And he was saying that, you know, around that time, there was a lot of people talking about Supermicro, which, you know, it is a bit concerning because when, you know, I think more novice investors, they see these run up and it's like, you know, the fear of missing out FOMO that really kicks in. So that's just a side note here. But yeah, I resigned as an auditor following a

series of red flags. So that was announced just this week, a few days ago that they resigned. But before that, Hindenburg Research, the famous short seller, and they have a pretty good track record. They also released a short report on Supermarco on August 27th. You can just Google it. You'll be able to find it. I can actually add into the show notes for those interested in looking at that. And we've talked about short reports before. And that in itself is not necessarily a reason to sell a company that you own or a reason to worry.

Obviously, they have incentive in the stock going down because they're shorting it. But like I always say, I think it's important to know about the short report. I would recommend reading it. Oftentimes, they're not super long, especially the ones with Indenburg. I think they're pretty digestible. It may take you an hour or two to go through them. But I think it's worth knowing what they're alleging. And then you make a decision, you do your own research, and you make your own decision. In their report, they reference Bob Luong, who was a former employee and filed a whistleblower lawsuit against Supermicro, alleging accounting violation. And this is, you know, the recurring theme that you'll see here and in September the Department of Justice so the DOJ in the U.S. launched an investigation into those accounting irregularities which are still at the

investigation is still ongoing and the most recent news is that EY announced on October 30th like I just mentioned they were resigning as auditor in their resignation letter this is and I quote the letter we are resigning due to information that has recently come to our attention, which has led us to no longer be able to rely on management and the audits committee representation and to be unwilling to be associated with the financial statement prepared by management. So in other words, they don't want to put their name on these financial statements. And that's important because that does not happen very often. It's very rare, especially for an S&P 500 company to have this kind of thing happen. And since the news came out,

the stock is now down more than 45%. And I looked at that like before opening hours this morning, we're recording on Friday, November 1, it's down another 4% today. So it's probably a bit more than that at this point. So in terms of what should you make of this? Well, first of all, I don't think you can ignore this, whether your own shares are worth thinking of starting a position. This is not just a short report. It's also a DOJ investigation and an auditor resigning. Like this is not just a short report it's also a DOJ investigation and an auditor resigning like this is not just one thing it's several things and that's not all so Super Micro had settled had had a settlement with the SEC after they had launched an investigation into its accounting practices in 2020 the amount of the settlement was 17.5 million so it's not like you know they have a clean track

record of you know not of not having or having good accounting practices and whether you own this stock or not or want to buy the dip you know at the end of the day it's your money you can do what you want but i would not touch this with a tenfold pull i don't care how cheap it gets why i think it's pretty simple. And Brayden, let me know if you agree with this, but there is definitely something going on with accounting. We just don't know the extent of it. And an auditor, like I said, doesn't just resign for no reason. That's a massive red flag. And then you pile on the short report, the DOJ investigation, the whistleblower, the settlement they had with the

SEC. There's no way of knowing how the company is actually doing because of the extent of the accounting issues that they're alleging and they're investigating. And plus, I mean, even if it comes out that it's not that bad, like how can you have confidence in that management team? Like I would have zero confidence in that management team. So that's why I'm just saying here, for these kind of things, when there's overwhelming evidence, like in this case, if you're looking to bottom feed, I would just say buyer beware because maybe it will walk out, maybe not, but it's definitely not a gamble that I would take.

There's just better opportunities out there. It takes a lot for big four accounting firms to walk away from business. Yeah. Yeah, they like money. It doesn't take much for them to get on board for a couple big checks. Partners can get behind that. Now, I hear what you're saying. And it's not a company I know particularly well. And I'm not really in tune with all the accounting issues. So I'll keep it pretty high level here. In essence, our job as investors is to tell a story, build a thesis, and back it up by numbers.

and back it up by numbers. It's a trust but verify type of situation, right? And as you become an investor and as you hold the position, you're continuing to reaffirm that thesis, continue to verify that thesis, and continue to check that the numbers are tracking. If I can't trust the numbers or if I even think that people who are close to the situation can't trust the numbers, what are we doing here? What are we doing? I don't know. I'm not an investor. I'm just officially a speculator. But that's my general feeling as an investor is like, I only really have the fact that we've built out this system for numbers to tell the truth for public companies and built out the system for them, for me to put my capital and trust that the numbers are real. And so if that falls apart, it's like investing in some of these more sketchier emerging markets. That's been the knock on them, right? It's like, I don't know if the numbers are real. Exactly.

Because I'm pulling it up here on FinChat.io and the problem is like, okay, the P has gone down to a 60, but you don't know if that's correct or not. Like you don't even know if their past accounting, like their past earnings are accurate. The Ford one, who knows what the hell's going on there as well. So people may look at the valuation like, oh, it's trading so cheaply right now. It looks like a deal. That's a problem. It could still be trading is super expensive because the numbers could be so inaccurate that you know we don't know what to make of it um so i completely agree there like you just once you don't know that you're just basically making a blind bet that it's going to pick up and the i guess the collateral damage here is you know nvidia doesn't come out with their largest customers but i think the rumor is that super micro is one of their top four.

So I think, you know, from what I could see, it's around probably 10, 15% of the business. I mean, who knows? I think it's probably not going to be a major issue because, you know, you have to assume that, you know, they're probably not fudging it too much. And, you know, the NVIDIA is recording the orders accurately,

so you don't have to worry too much. But know the nvidia is recording the orders accurately so you don't have to worry too much but if the company gets into precarious position going forward it could create some issues for nvidia as well so that's just kind of the other you know potential collateral damage that's going on here but yeah i guess i will just finish on this segment and say like look in this case i think it's fair to say that there is something going on. We just don't know to the extent when you have overwhelming evidence, this is just not a short report. This is, you know, it's one thing after the next. Very hot sectors and very stocks, you know, a group of stocks that get a lot of hot air under them in certain times,

bring financial shenanigans, historically. Yeah. Historically, that has been the case. Okay, let's shift gears here. Let's get nuclear. Let's do it. Let's go nuclear. So I'm going to talk about nuclear power, power small modular reactors big tech going nuclear

all the buzz words that people are talking about from from a chemical engineer i'm actually an environmental engineer who studied chemical engineering but who's who's counting i used to work on hydroelectric power plants and nuclear power facilities. So nuclear is cool again. As some listeners know, I like to sometimes turn the Canadian Investor Podcast into the Canadian Science Investor Podcast in a category where I can help listeners with investing topics, where I can put my engineering knowledge to use and make sure I still got it. You got to make sure you still got it every once in a while. My hope here, Simone, is that you, the listeners, can get a basic understanding of the technology without having to get too into the weeds. Now, how it works at a very high level, flexing your knowledge at the holiday dinner table and the importance of this technology

for our future energy demands because that is a key part of this discussion. So why now? Why talk about nuclear right now? Bitcoin. Here's an excerpt from... What's that? I said Bitcoin.

Bitcoin, yeah. A lot of power demands coming from bitcoin ai power data centers here's an excerpt from the finchat newsletter two weeks ago if you're not getting our weekly emails definitely sign up for an account you'll get them e-commerce and cloud computing giant amazon announced that it has signed three agreements with a consortium of public companies to support the development of nuclear energy projects, including the construction of many new small modular reactors. Last month, Microsoft also announced a deal with Constellation Energy to rebuild the reactor at Three Mile Island,

which had a nuclear incident, I think in the 70s, which is in Pennsylvania. On Monday, Alphabet, aka Google, announced that it will be buying power from nuclear energy company Cairo's power to meet its growing energy center demand. Google's senior director of energy and climate, senior director of energy and climate, of course, Google has a title like that. Yeah, embracing the ESG stuff, yeah. Exactly. Quote, we believe that nuclear energy has a critical role to play in supporting our clean growth van x uranium and etf uh uranium and nuclear etfs up 26 in the last month or so and so nuclear has a bit of a weird history

and in the world's excitement for this technology since we've been doing it, right? We first started building, designing reactors in the 50s. And there was a lot of reactors under construction through the 60s, 70s. It kind of peaked in the late 70s. North America, Europe, all across Asia had a lot of demand for nuclear power. And basically only Asia has had continued excitement about the technology realistically you've had major drop-offs in new construction projects for nuclear to cross all of europe and north america since now the a couple main reasons for that you know chernobyl in the that time frame of like the late 80s basically sent a scare through the entire world around,

is this safe technology to have? Is it worth the risks of a nuclear meltdown? And then you had in Japan, I think it was 2012, where Fukushima happened and there was an earthquake in Japan and there was a meltdown that happened there. By the way, side note on Fukushima happened and there was an earthquake in Japan and there was a meltdown that happened there. By the way, side note on Fukushima, if you Google what happened or watch YouTube videos on what happened, Fukushima will show huge amounts of disaster from the earthquake and tsunami. Those are not from the nuclear fallout. So there's been a lot of misinformation around that too.

I think there was a big issue on where it was built, right? It made it very vulnerable to earthquakes and tsunamis specifically. Correct. And the amount of backup power redundancy that every nuclear facility has built out since is immense because you don't have backup power to go to the reactors and the cooling, then you have this issue that happened in Fukushima. So that could have been very, very preventable. There's also the Three Mile Island one that Microsoft's trying to spark up right now, but there was no deaths and there's been no conclusive evidence that any radioactivity has caused any health issues there. So nuclear is like the aviation of energy.

It's super effective. The technology has been around for a long time now. And if something goes wrong, then yes, everyone hears about it on earth, but the chances of you driving your car and getting injured are much, much higher, right? And so it's kind of like the aviation of energy. And it's kind of sad that the only reason it's sexy again right now is for meeting huge energy demands and AI infrastructure build-outs, not for low emission power generation. Yeah. And over time, right? And maybe, sorry sorry i haven't seen your notes and let me know if you're getting there but we're now in what gen 3 and 4 or gen 3 plus and 4 something like that like i have listened and read on nuclear so i know a little bit right yep yep gen three reactors and even gen four, obviously you don't have

any of the capabilities of meltdowns that have ever happened in the past for the two really catastrophic meltdowns that have happened in the past new reactor designs. It actually isn't possible for them to be a flaw. And I'm going to get more and more into that on the new technology and also all the technology that Canada has built, which is quite interesting. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense, and with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA

account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think

it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. So not so long ago, self-directed investors caught wind of the power of low-cost index investing.

Once just a secret for the personal finance gurus is now common knowledge for Canadians, and we are better for it. When BMO ETFs reached out to work with the podcast, I honestly was not prepared for what I was about to see because the lineup of ETFs has everything I was looking for. Low fees, an incredibly robust suite and truly something for every investor. And here we are with this iconic Canadian brand in the asset management world. Well, folks online are regularly discussing and buying ETF tickers from asset managers in the US. Let's just look at ZEQT, for example, the BMO All Equity ETF. One single ETF, you get globally diversified equities. So easy way for Canadians to get

global stock exposure with one ticker. Keeps it simple yet incredibly low cost and effective. Very impressed with what BMO has built in their ETF business. And if you are an index investor and haven't checked out their listings, I highly recommend it. I bet you'll be as pleasantly surprised as I was that BMO, the Canadian bank is delivering these amazing ETF products. Please check out the link in the description of today's episode for full disclaimers and more information. So a nuclear facility has typically several reactors. For example, I'm going to talk a lot about Canada examples here in

Ontario because that's where all the nuclear power is. Bruce Power in Ontario in Kincardine has eight reactors. So that's one power facility, eight reactors. Pickering had eight. Some are shut down. I think four are in operation now. Four very large reactors are in Clarington, Ontario, or Bowmanville. So again, these are all along Great Lakes because you need a big heat sink. And those ones in Bowmanville, Ontario are in staggered refurbishment right now. Every 30, 40 years, you want to do a refurbishment of the entire reactor, basically. So I'll come back to Canada shortly. The main point here is a nuclear facility can have multiple reactors.

One, four, eight. These are very common. Two, you know, this is very common. Today, right now, there are 416 reactors operational around the world. 60 under construction, and 213, so roughly half of them that are operation, have been permanently decommissioned. And 92 big, massive nuclear projects abandoned construction. So I'm going to talk more about the abandoned construction and some of the problems around building these mega engineering products. So four things today. One, how does the nuclear

power work? How does this technology work in very simple language? Two, what about this technology in Canada, which is actually a very strong point in Canadian research and development? Three, what are some of the pros and cons of the technology? And what is the future slash WTF is an SMR? Okay, so one, nuclear power facilities are mega engineering projects. They cost billions of dollars. They're tens of billions of dollars. They're intensely complicated projects. There are many auxiliary buildings systems required on top of it. But at the core, no pun intended, the splitting of atoms known as nuclear fission creates a lot of energy when it happens. So in a nuclear reactor, you load fuel bundles of uranium, usually enriched uranium. In Canada, actually not, just naturally occurring uranium. They're loaded in and they begin to set off a controlled

chain reaction of the neutrons of the atoms and the uranium start smashing into the other atoms inside the fuel rods, inside the reactor. And this creates a chain reaction because when a neutron smashes into the atom and splits the atom, it releases energy. Now you have one atom turns to two and a neutron flies out. That neutron goes and smashes into another one. And this is all happening in a reactor where they're controlling the chain reaction. They're slowing it down so that it creates more chances for the neutrons to hit each other. All of a sudden, you have this amazing chain reaction of a ton of energy being created. This is nuclear energy.

You basically get a ton of energy being released, some radioactivity. And as a result, the water that's surrounding the reaction turns into superheated steam that steam then goes through a collection of turbines usually high pressure and then low pressure turbines that are spinning a generator so all of this is happening to spin a turbine that goes to a generator and creates electricity like a hydro dam would use water to spin the turbine right just like moving water would move a turbine as it goes over the dam and then you create electricity from the from the generator so exactly we're doing all this complicated beautiful chemical atomic engineering

ultimately to spin a turbine efficiently and generate power that way so it goes to a condenser for u.s power plants and cooling towers you know those big like homer simpson cooling towers you see for nuclear and it's got that exhaust that's coming out and it looks just incredibly toxic. Those older reactor types had really bad branding because it looks just so dystopian. It's just vapor? It's just water vapor.

It's not toxic. It's not emissions. It's carbon-free, all this stuff. The new reactor designs don't have those. And I think that that's probably good for the branding of nuclear moving forward. Yeah. Yeah. I mean, I think at the end of the day is just.

It distorts reality. Yeah. It's almost right. Like I don't like it's almost like an airplane, right? Like airplanes are incredibly safe. But when something bad happens, which extremely rare you know you hear about in all the news but yet there is a lot less people dying on airplanes than car crashes that happen every single year right so i think it's it's just a shock of when something bad happens even though

it's very infrequent correct and so canadian reactors you don't have those big cooling towers, but that's not important. But it does lead me to Canadian reactor designs, which is a technology called CANDU, C-A-N-D-U, which stands for Canada Deuterium Uranium. And CANDU technology, all ofario's three power facilities use can do technology new brunswick is the other province that has had nuclear technology just very recently uh the facility's not operational it's looking to resume in the future so as of recording today all power generation and the technology deployed in Ontario make sense. It's the largest population, huge power demand in Toronto, GTA. So the two greatest differences in the technology, in my view, I mean, there's more, but the

two biggest glaring differences between that one and a reactor in the US, for example, between that one and a reactor in the US, for example, is that it uses natural uranium instead of needing to go through an enriching process. They operate using natural occurring uranium. It's more abundant and doesn't have that complex enrichment process, which is a nice perk. Two, it uses something called heavy water as the cooling and the water in a closed loop that goes around the reactor containment. And heavy water is, that's where that name can do, Canadian deuterium, uranium. Deuterium is just a stable isotope of hydrogen. And so water being H2Oo heavy water is d2o so it's an isotope of hydrogen and uses d2o which is heavy water to as the cooling main cooling mechanism i'm going back

to my chemistry classes in high school right now that's exactly right heavy water is very effective at slowing down neutrons without absorbing them. And so this facilitates a nice sustained, stable nuclear chain reaction with natural uranium. And using this heavy water in a closed loop makes can-do reactors very, very safe. So this is very good technology. I think a lot of people in the 60s should have been adopting can-do technology instead of what the Soviets were using and even what the US was using. This tech is now being used. So we're exporting this technology to Europe, China, Korea. I think there's a lot of appetite for can-do reactor technology in modular reactors, aka small actors smr which is the hot topic now and for a few years what the name implies small module reactors can address this expensive construction process and be modularly plopped in like lego blocks to be operational anywhere faster and cheaper this This is the promise. We'll get to that. We'll get to that.

All right. So what are the pros and cons? With every power generation type, whether it's nuclear, hydro, solar, wind, coal, natural gas, there's pros and cons of every single one. I'll tell you one big pro is it's not intermittent. That's one of the big pros of nuclear power and a big cons of every single one. I'll tell you one big pro is not, it's not intermittent. That's one of the big pros of nuclear power and a big cons of renewable power. Yeah. It is one of the biggest pros, reliable baseload power. And so, yes. So the three that I have listed here, and again, there's not an exhaustive list. The pros, nuclear power is incredibly safe. There have been two deadly disasters, and a lot of it overstated, but two deadly disasters in Chernobyl and Fukushima. But new reactor technology, these types of meltdowns that have occurred, are simply not possible anymore. What generation was Chernobyl?

One. One, okay. Chernobyl. One. One, okay. Yeah. Another pro is there's no emissions released in operation. Of course, the construction of these things, construction of any type of facility, whether it's hydro or solar, there's downstream effects in the construction process, but in operation, there are no emissions released. Folks will say, not in my backyard. I don't want a nuclear facility in my backyard. And then live near a coal or natural gas power plant. I have a funny anecdote on that. So I encourage people. So you're familiar with the All In podcast, right? With David Sachs, Friedberg and all that. And a couple of episodes ago,

I don't remember which one, there was an amazing interaction between david sax and friedberg who friedberg is the the guy that knows about like science and he like knows about this stuff a whole lot and david sax he was basically like you could tell he was like disregarding the facts he's like well i still wouldn't want it like anywhere near my place and he kept saying... It's NIMBY. Exactly. NIMBY.

Even though Friedberg just kept reiterating, look, these are not Gen 1. These are newer generations. The risk of meltdown is essentially zero or as close to zero as it can be. Just giving him all the facts. There was only two meltdowns. They're older generation. Fukushima was also like you know also he he I know he's a he's a Bay Area guy he lives 50 miles from your reactor but it was just interesting

that you know it is in his backyard and he doesn't even know yeah exactly it was just interesting how resistant he was that's why I wanted to mention the anecdote and people can go look for the clip it was just amazing the interaction and you saying that it just kind of brought me back to that right like people's brains shut down because i think that the public has been told that it's scary and so folks will say not in my backyard and that yeah they'll live near a coal or natural gas power plant or they'll not even realize that there's a nuclear facility in their backyard. Folks in Toronto might not know that they're living beside an operational nuclear power plant

and the Pickering generating station for the last 60 years. And they should be glad because that has been providing Toronto with 60 years of clean, reliable baseload power. So coal and natural gas or any ice vehicle, for instance, coming out of the exhaust releases nitrous oxide particles amongst other particulate matter, which is very, very small, but nitrous oxide is particularly bad. They're tiny particulate matter that go into the human lungs without our lungs filtering it.

They're too small. The particulate matter is too small. And nitrous oxides are horrible for human health. They go straight into your bloodstream and essentially we have no way of screening them. They're terrible for human health. The World Health Organization is saying that one in six people are dying from particulate matter related health issues, especially in China, where there's a lot of coal. These things are terrible. And so this is my last very important pro, which you hinted at first, reliable baseload power. This cannot be understated. There are so many clean power sources, but they're seasonal or even daily intermittent based on the weather.

Even hydro, which is fantastic. Hydro is amazing. Like maybe the goat of power generation if you have the resources like we if we have the resources like quebec ontario bc all like so much hydro bc and quebec are almost 100 hydro but again they don't have a big city center like 15 million people in the gtha that they have to support and it also disrupts natural habitats when they're being built, right? Like I think a lot of people kind of forget about that too. And water flows can, the damming can create flooding,

whatever it is. Again, no source is perfect, but it's really, really good. And so is nuclear. You're providing reliable baseload power that you can run full tilt, full tilt 24-7. That you cannot understate how important it is that you can run these things full tilt 24-7 to build a resilient electricity grid. This is so, so important.

Like hydro, there's something called Frechette where all the winter snow and ice melts, and you have brilliant high-flowing water systems. There's actually so much water, they have to spill it over the side. They can't even use it all. But then late summer, those river systems are a lot drier. And so the power generation coming out of them is just a lot lower. So yes, you touched on this first. Reliable baseload power is very, very important to build a strong electricity grid. All right, the cons. The first one is the most obvious one, disaster risk. So while fear mongered more and not a material risk as much anymore, there have been two big scary disasters that people know about. This is a big risk as well, if there were to be war or there were to be terrorist attacks, like the security of these things is very important. And that is a risk. Nuclear waste.

Again, while on quote unquote scary, I'm here to debunk that this is not a material concern. For example, since the 60s, Ontario has been producing beautiful nuclear power and along with that, nuclear waste. And all of it exists in one facility in Kincardine with room to spare. One facility. It's got all of it, room to spare. The fuel rods sit in pools for 10 years

and then they're moved to a storage facility as well. So again, it's not like there's just gonna be hazardous radioactive material everywhere if you're using nuclear i have a stupid question probably how long does it take for the material not to be radioactive anymore once it's being stored oh much longer than you know like is it hundreds of thousands like i don't know i'm just curious i have no idea yeah millions okay okay millions of years as as far as i know the half-life on them is it's just absurd right but you you get them to a state where they need to sit in those pools literally like they

look like swimming pools beside the reactor in the facility for about 10 years and then they get moved to another site longer term swim at your own risk yeah don't go don't go swimming in there um so yeah the the fuel like that that used uranium fuel be radioactive from my time in the industry i recall millions of years way past your offsprings offsprings offspring but again we're not talking about mountains of waste here right it's this is very concentrated when you think about it too people will get scared but you know we have something in the sky that you look at everything that is extremely radioactive it's not close to home as obviously the sun i'm talking about but i mean it's part of our universe like it's everywhere all the power getting emitted

onto us is nuclear power and it's said i mean it's we we use it as solar power but it's it is nuclear power that giant sky a giant star in the sky is one big nuclear fusion reaction. So the two biggest cons by far, in my view, is that they are engineering mega projects. They take billions of dollars to complete. And it's not even the fact that building nuclear is so, so complicated, which it is, but it's complicated because these are mega engineering projects. Mega engineering projects take a long time. They're always delayed and they're always over budget. Whether it's building this or building a new subway system or a new highway or a new massive infrastructure project, they're billions of dollars. They're usually late and they're usually over budget. You're preaching to the choir as an Ottawa resident with our light rail system. I know we have some Ottawa listeners. They will know what I mean.

Yeah. And if you're in Toronto, you know the Eglinton LRT. Mega engineering projects are a pain in the ass. And so this is the biggest issue. And the reason why appetite for them is really tricky to navigate is they take a long time and they're very expensive in terms of upfront capital cost. And regulatory approval, I heard, takes a long time too, right? This is working perfectly. Okay.

Sorry. You're crushing it right now. You're hurting the cats. I didn't read this stuff either. No, no. Well, it's what's the future? And I'm going to talk about regulation. What's the future slash WTF is a small modular reactor, aka SMR.

So last piece here. The future needs more nuclear reactor construction. It needs more facilities being built. And if we want to meet the electricity demands and aspirations that humans have, we need clean energy and we need to reduce emissions and toxic particles that are terrible for human health. I don't care if... I know a lot of people, well, folks will just say, ah, you know, global warming, not in my lifetime or whatever. I don't care. I think that's bogus, but how about this? Go live beside a coal facility and see how much particulate matter

you consume in a year. And it is slowly killing you. It is. I'm sorry to be blunt. It slowly kills you. Particulate matter and nitrous oxides that are less than, they're like three nanometers in diameter, go straight through your lungs, no filtration, straight into your bloodstream and basically never leave. This cancer causing deadly toxic substance that goes in your bloodstream and never leaves. So first, public education needs to be there for nuclear. And hopefully, segments like this podcast can continue to happen. Because look, the world is looking for clean, reliable baseload power technology, and it's hiding in plain sight. The not- my backyard mentality

is completely baseless. New reactor designs, and folks will say not in my backyard, should be glad that they have nuclear power powering their community. Instead of breathing these particular matter, less than a fraction of a micron are slowly killing them. The concept of a small module reactor is certainly an exciting idea, right? Because it addresses what I said are the two biggest cons in my view, which are huge upfront capital costs and very, very long lead engineering time and construction times. So plopping one down for like, let's say a mining operation to reduce the need of operating fuel, like diesel generators is a great use case.

The technology is coming along and there's four being built right now in Ontario and many more across the world. But my honest assessment, having spent time on a small module reactor project and observing the industry over the last 10 years and seeing the exciting stuff come out and the disappointments come out as well, is I'm very disappointed in the project of small module reactors. And the reason for that is they're not fulfilling the promise of being inexpensive or quickly built. They're just not. And since my time of starting that industry, there's shovels in the ground on these projects right now,

but they're still very expensive. They have huge need for auxiliary equipment to be built around them to support the buildings, prepping the site, and the relentless red tape and regulation about getting a nuclear operating license. So you can say, Simone, I can build this massive, massive facility, okay, that's going to produce maybe two gigawatts of power. power. Or I can say, hey, I can assemble half of it at the manufacturing site and then just go assemble it and plop it down, maybe only 100 megawatts, which is 1 20th of the size of the huge facility. But I still have to go get all of the same permitting. So it's a very bad trade. It's a very, very bad trade. I spend maybe one quarter of the money and one half of the time to get one 20th of the power. It's not a good trade. So we need more nuclear reactors. We need more of these mega infrastructure projects being built because it's reliable, clean baseload power that's not producing that garbage that you don't want in your bloodstream.

But these small module reactors, the promise of them is not hitting the mark. I don't know if it's the technology or the regulation needs to change. I think probably both. But the promise of SMR is we need to cool our cool our jets and get back to building big nuclear facilities that's my opinion i mean i agree i mean that like i said i think i was probably underselling like i've been reading about these and listening to experts on it obviously i'm not as well versed as you and there's stuff that you talked about i i didn't know so it was good

listening and that's why I was asking and chiming in but I do wonder because a lot of environmental groups were you know for decades I mean the last two decades I would say potentially they were very adamantly against nuclear power I mean it's just i do wonder where that comes from that stems from like sometimes i wonder if there is hidden interest groups that are kind of feeding that information too just because follow the money man follow the money yeah no i mean it's um and just using you know the two you know uh chernobyl and um sorry the other one i i forgot fukushima as kind of a reason not to but it just yeah it baffles me a little bit because of course at the end of the day you know the progress that we do as a race at the end like it is based on you know energy

you know it's the basis of everything and to have some clean energy and you know and a source that's not intermittent it's stable it's always there um to me it makes all the sense in the world i mean i think there's more openness now in the last couple years from different levels of governments uh whether it's federal provincial it seems like there's been a shift in the last couple years whether that translates in less regulation and more smrs oh you know coming online in the next five ten five to ten years we'll have to see because these things take time but you know i i have noticed that shift i just wanted to chime in because i i do wonder sometimes why this opposition was so there you gotta you

gotta think yeah like tinfoil hat comes on like you gotta think that there's a lot of lobbyist groups from from big big carbon out there but also i think a lot of these folks are very risk averse the the environmental climate type folks sometimes they don't actually focus on the right kpi which is less emissions right like that's it that's the that's the correct kpi and you see something like chernobyl which is startling to say the least right like it is an entire area which had extreme nuclear fallout that was basically uninhabitable by humans after they build this massive containment dome on it 60 years later it looks scary it is scary there's movies there's

documentaries hbo had a great series but it was so good yeah and if you like puppies do not watch that series there's a scene in there like if you like dogs like it's it's hard to see that hbo dramatization is fantastic but again yeah we're still here talking about something that happened over 60 years ago that can't happen anymore with new designs. Now, what I will say is another major drawback, which goes back into these huge, expensive capital costs and long lead times, is you got to refurbish them every 30, 40 years. And refurbishing them is sometimes no easier than building them from scratch. Yeah.

Right? And I guess, I mean, for me, the best analogy is still going back to the airplanes, right? Like airplanes 60 years ago, I would not feel as confident getting on an airplane back like, you know, that was used back then today. Like, I think a lot of people kind of forget that how planes have changed over time. And I know it's a different analogy, but it's just, you know, when there is an accident that happens, it does, you know, make headlines a lot more than, you know, you don't see headlines about, at least I don't, maybe there are some about people dying of cancer because they live too close to a, you know, sorry, what you were talking about?

Cold facility. Yeah, it's the lack of sleep that's starting to kick in. A coal facility all their lives, right? You don't really hear all that much about it. There might be some articles, I'm sure there are, but it doesn't make headlines. Right. And a lot of these things are like marketing and public perception. Like I'll give you an example. Natural gas.

Sounds better than coal, right? And it is. Emissions per gigawatt hour production is significantly lower, but it's still very, very polluting. It's still taking a carbon from the earth and releasing it at scale from a huge stack. And there's a lot of efficiencies that we have now, like new natural gas facilities will run combined cycle power plants and they're extremely efficient. But you're still using a carbon-based fuel to create this power. And yes, it's reliable baseload power.

So that's another thing that people really use it. And you can sell yourself the story that building out that type of infrastructure compared to coal, pat yourself coming out of there. Still a ton of carbon CO2 equivalents coming out of there. And so this technology, it's hiding in plain sight. They take ages to build. So that's why my cry is like, let's stop messing around with these little 100, 200 megawatt facilities that still take eight years to build. little 100 200 megawatt facilities that still take eight years to build when we can spend 10 12 years and build two gigawatt reactors times eight you have clean baseload power for an entire city center like chicago you know it's like this is this is how we should be doing or i mean speed up the approval for the smaller ones and make it more worldwide

to get approved and the time to be built like have different processes like for for different types of you know of size and different types of plans being built i think that would be a common sense approach like it still has you know yeah i think there still needs to be regulation but there could be common sense regulation. Correct. Because you're right. You still want these SMR technologies to be deployable. And people should be excited about that. The problem, we're just getting long lead times with lesser capacity.

Yeah. That's been the result of them, right? So hopefully things change. No, I think that was great. I mean, I had another segment. It's okay. We'll keep it for next time. But no, that was great. I mean, I had another segment. It's okay. We'll keep it for next time. But no, that was fantastic. I appreciate you doing that.

Like I said, I thought I knew a decent amount. I knew a good amount of what you talked, but I learned quite a bit as well. So I definitely appreciate that. And I'm sure the listeners will appreciate that too. No problem. It's one of those things that everyone kind of knows something about, right? Yeah. But it's so important

and they might not realize that the light's turning on because of this technology that's been going for a long time. All right. Thanks for listening, folks. We really appreciate you. We're recording this on Friday, November 1st.

It'll come out two days on the Monday or the three days on Monday. And that means today we post our joint TCI updates, which are monthly portfolio updates. I have to do mine right after this. I bought a stock. I sold a stock. I think I might sell something between now and when I do it.

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We'll see you in a few days. Take care. Bye-bye. The Canadian Investor Podcast should not be construed as investment or financial advice. The hosts and guests featured may own securities or assets discussed on this podcast. Always do your own due diligence or consult with a financial professional before making any financial or investment decisions.