Shares of NuScale Power (SMR 0.24%) surged another 33.9% in June after a stunning run-up in May, according to data provided by S&P Global Market Intelligence. The nuclear energy stock is now up a jaw-dropping 268% so far in 2024, as of the time of this writing.
What's fueling NuScale Power stock's rally?
Nuclear power accounts for nearly 20% of the total electricity generated in the U.S. and is the nation's largest source of clean energy. That largely explains why nuclear energy is a key component of the U.S. government's plans to meet its ambitious climate goals. The government is taking several steps to boost domestic production of uranium -- a key nuclear fuel -- and jump-start the nuclear energy industry. One of its latest moves, in particular, could benefit NuScale Power.
NYSE: SMR
Key Data Points
In mid-June, the Department of Energy (DOE) issued a notice of intent for $900 million to fund small modular reactor (SMR) technologies. Because of their small, modular designs, SMRs can be used to build nuclear power plants in smaller spaces that can deliver power to several sectors and industries, and can also be installed into existing grids to provide low-carbon power. SMRs also require lower fuel and are relatively safer than traditional nuclear reactors.
NuScale Power specializes in SMRs and has developed a technology that's also the only one in the U.S. with a design certified by the U.S. Nuclear Regulatory Commission. Not surprisingly, NuScale Power stock surged in June, with at least one analyst also turning hugely optimistic about the company's prospects under the Biden administration.
B. Riley Securities analyst Ryan Pfingst maintained a buy rating on NuScale Power stock and upped its price target to $14 per share from $8 a share in June. The analyst believes government funding could reduce NuScale Power's need to raise money through share sales and therefore mean lesser dilution for its existing shareholders.
Is it too late to buy NuScale Power stock?
So far, the DOE has granted NuScale Power four cost-share awards totaling roughly $600 million to develop and commercialize its SMR technology, with the last award dating back to 2020. With the government now ramping up efforts to boost the nuclear energy industry and allocating funds for SMRs as well, it's not wrong to expect NuScale Power to benefit.
That said, investors may want to tread with caution here, as SMR technology is still in its nascent stage, and there's no knowing yet how cost-competitive power generated from SMR nuclear plants will be. Above all, NuScale Power has yet to commercialize its technology and generate its first revenue from SMR, but the stock's market capitalization has already crossed $1 billion, as of this writing. Young growth stocks like NuScale Power can entice investors, but they can also be highly volatile and risky.
