Why Are Nuclear Energy Stocks Skyrocketing?
Video: Why Small Modular Reactor (SMR) stocks are soaring.
Transcript
The stock prices of nuclear startups working on new, smaller modular reactors have been skyrocketing over the last few months.
Nuscale Power, ticker SMR, has gone from a low of around $2 to over $15, giving the stock a market cap of $1.3 billion.
Oklo's stock is down slightly from when it was listed on public markets, but it still has a market cap of $1 billion.
Nano Nuclear Energy, ticker NNE, is a developer of micro nuclear reactors… the stock has gone from a low of $3 to $25 now, sitting at a market cap of $725 million.
In this video, we’ll review why these stocks are doing so well… and some challenges they might face in the future.
So, these companies are developers of nuclear small modular reactors, and microreactors. A conventional nuclear reactor tends to generate 700 megawatts of power or more. By contrast, a small modular reactor will generate up to 300 megawatts of power, and microreactors will typically generate up to 10 megawatts.
Small modular reactors are seen as the future of nuclear power because these facilities can be factory-assembled, allowing for faster construction times and industrial scale, reducing costs over time.
In situations where there isn’t suitable energy grid infrastructure, potentially in more rural or remote areas, microreactors could be used. Which are small enough to be transportable by truck to any given location.
As of the end of 2023, more than 100 small modular reactors were already under construction, half of which had been put on hold or scrapped over the past 20 years as the nuclear industry was fighting for public sentiment.
But there are a few primary driving factors that have brought nuclear back into the public spotlight:
Combatting climate change
Government support
The AI boom
As one of the only reliable forms of clean, baseload power, nuclear energy is now receiving funding support from the US government. Particularly for small modular reactors, which is why these stocks are booming right now.
As I discussed in a previous video about nuclear funding, which I’ll link in the description… I discussed two key pieces of legislation that were recently implemented by the Biden administration…
The first was $900 million of government funding for companies developing SMR technology, which was part of the Bipartisan Infrastructure Law.
$800 million of that is planned to support up to two first-movers in this sector. Investors are primarily banking on NuScale being one of those companies… because it is the only company in the US with an already approved SMR design.
The second piece of legislation worth noting was the ADVANCE Act. Recently signed by Biden, this law expedites the regulatory process of approving new reactor technologies. This includes microreactors as well, so not just small modular reactor designs.
In a letter from Oklo, they noted this bill could reduce hourly licensing costs by over 50%, open up new monetary funding efforts, and streamlines the deployment time process. So, this does serve as a huge, and much-needed tailwind for the sector.
The world has slowly been waking up to the realities of climate change and nuclear power. Nuclear energy acceptance in America is at its highest point in a decade, as the fear behind the Fukushima nuclear meltdown continues to subside.
Companies are starting to realize just how much energy artificial intelligence will use. SMRs have been proposed as a potential solution, given their benefits, such as faster build times and reduced costs. In theory.
All of the large tech companies and influential names like Bill Gates, Jeff Bezos, and Sam Altman have been investing in these nuclear startups.
Jeff Bezos is invested in General Fusion.
Google invested in TAE Technologies.
Bill Gates founded TerraPower, which recently started building its nuclear power plant in Wyoming.
Sam Altman is the chairman of, and backing Oklo, one of the few public SMR companies.
So there’s a massive wave of support from the technology sector.
But, as I mentioned at the start of the video, even with all of this support, these companies have some issues ahead of them.
Even with the ADVANCE Act in place, most of these companies don’t have approved reactor designs, and that’s incredibly time-consuming. As well as resource-intensive.
Taking a look at the public company financials, NuScale has around $130 million in cash on their balance sheet, while generating $1.4 million in revenues in the first quarter… with losses from operations sitting at $44 million. Does that sound like a company that deserves over a $1 billion market cap? Probably not.
Even if they’re banking on receiving money from the federal government, their costs will increase over time, and who knows when their first plant will be built.
An article from Utility Drive notes that their first planned project was terminated due to ever-rising costs, especially increased interest rates.
When building out the first plant, all of these companies are likely going to see significant cost overruns, and potentially time overruns as well. So you have to plan for that as an investor.
Nano Nuclear Energy, making microreactors that can be portable, should be less costly. They should have around $14 to $15 million in cash after their IPO raise, and lost $1.7 million last quarter.
Both NuScale Power and Nano Nuclear Energy are lacking in the funds department, so they’ll either need to raise money or bank on getting some of the money from the US SMR bill. That could also take time to get dulled out.
In fact, Nano Nuclear already announced they’re going to raise an additional $18 million, which isn’t a crazy level of dilution… but you can see how this is going to play out when they plan on building their first microreactor in 2030 to 2031…
So, in the best-case scenario, it’ll take six years for Nano to start generating real revenues. That goes for all of the companies I mentioned.
Oklo is providing the earliest timeline, assuming they’ll be able to build their first SMR by 2027. They already raised $260 million in their SPAC deal, so they have plenty of cash to work with, for now. With that said, the point remains…
As investors in these companies, we would have to bank on everything going perfectly according to plan… when developing a novel nuclear technology. I have my doubts. It’ll likely be at least three to four years before any of these companies are producing energy…
That’s a significant opportunity cost, and that’s assuming things work out as these companies slowly work their way to building their first plant, if they ever do at all.
Personally, I think it’s still far too early to consider buying any of these stocks, and any of the gains generated here are likely to be short-lived. But as always, your investment decisions are yours to make.
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