Last month, shares of NuScale Power (SMR 4.02%) shot up more than 93%, according to data from S&P Global Market Intelligence. The designer of small modular nuclear reactors (SMRs for short) won approval for one of its designs and is benefiting from the narrative around a nuclear renaissance in the United States.
It currently has a market cap of $9 billion, zero revenue, and a share price that is up 347% in the past year.
Here's why the stock rocketed higher yet again in the month of May.
A nuclear renaissance?
We are in the midst of a power generating revolution. The insatiable demand for electricity from artificial intelligence (AI) data centers is causing power consumption to grow again in the United States.
To prepare to match supply with demand, the large technology companies are signing long-term deals with utilities. For example, just this week, Meta Platforms signed a deal with Constellation Energy for 1.1 gigawatts of power from one of its nuclear reactors. And the president has signed executive orders calling for a reinvigoration of the nuclear power industry.
While none of this will directly impact NuScale Power, investors generally view the company in the category of nuclear stocks, which is why its shares are soaring this year. It has nothing to do with its financials, which are basically nonexistent. The company hopes to benefit from this demand when its reactors come on line, which will not be until 2030 at the earliest.
Image source: Getty Images.
The truth about NuScale Power stock
NuScale may be a hot stock today, but it is highly risky and has a difficult path ahead of it. It is generating zero revenue, will not generate any for many years, and is burning around $100 million in free cash flow annually. It has a market cap approaching $10 billion even without any sales.
SMRs are an interesting idea, but are a cutting-edge technology that may not work at scale. Investors buying shares today are essentially betting on a science project making a company with a market cap of $8.9 billion worth something well into the future.
This is not a good bet to make. It could end in pain for shareholders. Avoid NuScale Power stock today.
