Shares of NuScale Power (SMR +1.65%) fell on Tuesday, finishing down 6%. The drop came as the S&P 500 and Nasdaq Composite rose 0.9% and 0.6%, respectively.
In a research note released today, UBS analyst Jon Windham maintained a "Neutral" rating for NuScale stock, but slashed his price target by nearly 50%. The note comes amid news that complicates the narrative driving NuScale stock higher.
NYSE: SMR
Key Data Points
UBS cuts NuScale's price target
Windham cut his price target for NuScale stock from $38 to $20, a massive drop that now represents only a small upside from its current level. The research note cites concerns over potential cash flow issues from a major project.
AI's energy demands could be less than anticipated
NuScale and other nuclear companies have seen their stocks skyrocket this year as investors anticipate the energy needs of artificial intelligence (AI). Much has been said about the growing supply gap and the strain AI data centers will put on the grid.
Today, however, it was revealed that Meta Platforms is in talks to spend billions on chips from Alphabet. The chips, TPUs, are specialized semiconductors that are much more energy efficient than the GPUs that have made Nvidia the most valuable company in the world.
Image source: Getty Images.
NuScale investors appeared spooked by the possibility that this is a sort of canary in the coal mine, indicating the industry is moving toward a much more energy-efficient model, one that may drastically reduce demand for what NuScale is building.
I think this fear is likely overblown, but I still wouldn't recommend NuScale stock at this price. I think it could have a future, but there are still too many unknowns to justify its current valuation in my eyes.
