Nuclear energy is enjoying a resurgence, with over 31 countries signing a pledge to triple their nuclear capacity by 2050. Last week, several tech giants, including Amazon, Alphabet, and Meta Platforms, signed a pledge backing this goal, joining 14 major financial institutions that have also backed the plan.
Looking forward, it's clear that renewables alone won't be enough to meet growing energy demands. Nuclear energy could play a vital role in the future of energy, and one exciting technology that could play an important role is small modular reactors (SMRs).
One company leading the charge is NuScale Power (SMR +0.84%), the first to receive design approval and certification from the Nuclear Regulatory Commission (NRC). However, it hasn't been a smooth ride, and this technology will take some time to come online.
Here's what investors need to know about NuScale and where things will go from here.
NYSE: SMR
Key Data Points
Small modular reactors could play a key role in nuclear energy development
SMRs could revolutionize the future of nuclear energy by offering a flexible and scalable solution that can cater to diverse energy demands. Their modular design sets SMRs apart, which allows key components to be prefabricated at NuScale's facility before being transported and assembled on-site. This cutting-edge approach streamlines the construction process and promises to lower costs and accelerate the timeline for operational readiness.
NuScale stands out as the first company to obtain Standard Design Approval from the U.S. Nuclear Regulatory Commission for its 50-megawatt electric (MWe) SMR. This milestone positions NuScale ahead of its competitors and potentially gives it a first-mover advantage.
It could be years before this technology is commercially available
Investors must remember that this technology is still being developed, and it could take years for it to be deployed on a commercial scale. Right now, regulators have approved NuScale's 50 megawatts of electricity (MWe) reactor. However, to make its SMRs more cost-effective, NuScale had to upsize its reactors to 77 MWe. This version has yet to be approved by the NRC, although NuScale expects to achieve a standard design approval by mid-2025.
Furthermore, this technology has taken some time to develop, and cost savings have failed to materialize. For example, the Utah Associated Municipal Power System (UAMPS) terminated a 2015 agreement with NuScale in 2023 due to cost overruns.
As part of the agreement, NuScale was going to construct 12 reactor modules to generate up to 600 MWe. The project was initially planned to be up and running by 2023. Initially, the project was expected to cost around $3 billion. Costs rose to $6.1 billion and then again to $9.3 billion, and the project eventually became too expensive for UAMPS to pursue further.
NuScale and others could benefit from a favorable backdrop for nuclear power
The landscape for nuclear energy companies is looking increasingly promising. U.S. Secretary of Energy Chris Wright has experience in the energy sector and a background in nuclear start-ups. Before stepping into his role, Wright served on the board of Oklo, another company pioneering advanced nuclear reactors and backed by OpenAI CEO Sam Altman.
There's a sense of optimism that Wright, coupled with President Donald Trump's ambition to "unleash American energy," will help remove obstacles and promote domestic energy production from diverse sources.
Image source: Getty Images.
Moreover, the rapid advancements in artificial intelligence (AI) are set to fuel a robust long-term demand for energy. NuScale is currently engaging in discussions with hyperscalers and has partnered with ENTRA1. With ENTRA1 Energy on board as its development partner, NuScale is diving deep into advanced talks with various companies spanning the technology, utilities, and government sectors.
Buy, sell, or hold NuScale Power?
NuScale is the only company currently with an SDA from the NRC for its small modular reactor, which gives it a first-mover advantage. However, the company still needs the commission to approve its larger design, and even then, it will take several years before it operates commercially.
The company is still growing and will likely continue racking up losses for years, making the stock vulnerable to volatile price swings. Over the past year, it has traded as low as $3.79 and as high as $32.30. For conservative investors or those with a shorter investment horizon, NuScale is too risky to own.
For now, NuScale is a story-driven stock, and investor sentiment will drive the stock based on its accomplishments (or setbacks) and the broader narrative around nuclear energy. While the narrative around nuclear energy continues to build momentum, NuScale Power remains speculative, making it best left for aggressive investors with a long investment horizon.
