Does Soaring AI Demand Mean You Should Buy Nuclear Energy Stocks?

Driven by projections of increased electricity demand from AI, nuclear energy start-ups NuScale Power and Oklo have seen their stock prices increase over 300% in the last year; however, neither company is projected to generate revenue until after 2030, with NuScale facing a $100 million annual burn rate and Oklo lacking NRC approval for its reactor design, leading analysts to believe these stocks are currently overvalued and should be avoided.

Analysis

The burgeoning demand for electricity, primarily driven by the power-intensive requirements of artificial intelligence data centers, has significantly uplifted utility sector valuations, exemplified by Constellation Energy's 634% stock increase since early 2022. Projections indicate a fourfold expansion in electricity consumption by AI data centers by 2030, fueling investor interest in pure-play nuclear energy stocks like NuScale Power (SMR) and Oklo (OKLO), both of which have seen their shares surge over 300% in the past year. However, a closer examination reveals substantial fundamental challenges for these specific start-ups. NuScale Power, despite having the only NRC-approved small modular reactor (SMR) design, faces difficulties securing customers, highlighted by a cancelled Utah project due to cost overruns, and is not expected to generate significant revenue until after 2030. The company is burning approximately $100 million annually with roughly $500 million in cash reserves, raising potential liquidity concerns given its pre-revenue status and the unproven nature of its technology at scale. Oklo, which proposes a liquid metal-cooled reactor using recycled nuclear waste, has yet to obtain NRC approval for its design, casting uncertainty on its operational timeline within this decade. Oklo is also pre-revenue, with about $200 million in cash and an annual burn rate of $44 million. Consequently, while the narrative of increased nuclear energy demand is compelling, neither NuScale (market cap ~$10 billion) nor Oklo (market cap $7 billion) are positioned to meet the projected 2030 demand surge, rendering their current valuations, unsupported by revenue or near-term operational viability, highly speculative. The strongly negative sentiment scores of -0.8 for both SMR and OKLO reflect these concerns.

Key Decisions for Investors

• Investors should exercise extreme caution with NuScale Power (SMR) and Oklo (OKLO), as their current valuations appear significantly detached from their fundamental realities, including pre-revenue status, substantial cash burn rates, and protracted timelines to commercial operation.
• Consider that neither NuScale nor Oklo are projected to contribute to the anticipated surge in AI-driven electricity demand by 2030, suggesting that any investment based on this near-to-medium term catalyst may be misplaced for these specific entities.
• Given the lack of revenue, uncertain regulatory pathways for Oklo, and customer acquisition challenges for NuScale, these stocks represent highly speculative investments and may be unsuitable for portfolios not explicitly allocated to high-risk, venture-stage companies.