Shares of NuScale Power (SMR -4.22%) fell 31% in August, according to data from S&P Global Market Intelligence. The nuclear energy upstart and designer of small modular reactors (SMRs) is experiencing wild gyrations with its stock price. The stock is up 432% in the last year and trades at a market cap of $11.5 billion, even though it generates minimal revenue and is burning a lot of cash.
It's been a roller-coaster ride for nuclear start-ups
Nuclear energy stocks soared at the beginning of this summer, with the current presidential administration's push to accelerate the development of nuclear energy to keep up with data center demand around artificial intelligence (AI). President Trump signed an executive order for advanced nuclear reactor technologies, of which NuScale Power is one.
In fact, NuScale Power is the only SMR company to have its design approved by the Nuclear Regulatory Commission (NRC), which could give it a head start in winning customer contracts. However, it has failed so far to win any customer contracts outside prospective contracting from a Romanian power company that's exploring whether to use SMRs for its upcoming energy needs.
With close to zero revenue and a history of burning cash, NuScale Power is a stock that trades with a ton of volatility. As the air comes out of the post-executive order excitement, it is no surprise to see NuScale Power stock hit a bit of a rough patch. The company has no fundamental basis to anchor its $11.5 billion market cap, which makes it a risky stock to invest in.
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NuScale Power's uncertain future
NuScale Power has a few energy projects in the works that it could potentially win deals on, including a recent proposal from the Tennessee Valley Authority. Bringing these to fruition could help it actually develop an SMR to be deployed in the real world instead of talking about it, which has been all the company has done since its inception.
Even if these projects get approved, NuScale Power won't generate much in revenue to warrant its $11.5 billion market cap, with revenue not showing up for years due to the long project life for nuclear energy developments. It is foolish to buy a stock valued at over $10 billion that's generating zero revenue. Therefore, investors should avoid putting NuScale Power in their portfolios, given its uncertain future.
