NuScale Power (SMR +6.67%) has an exciting opportunity. The nuclear power industry is in the midst of a renaissance, and NuScale's nuclear technology could address some of the biggest challenges of large-scale nuclear power plants. However, it still hasn't sold its first reactor. Here's what you need to know before you buy this stock.
What does NuScale Power do?
The revenue NuScale Power currently generates is all related to its consulting work for Fluor. Fluor is a large construction company that is working with RoPower, a Romanian power company. RoPower is assessing the feasibility of building a large nuclear reactor by linking together six NuScale Power small modular reactors (SMRs).
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This could be a major opportunity for NuScale Power, as it would be the startup's first sale. So it would provide the company the opportunity to prove that its technology works and that it can manufacture its small modular reactors in a timely and cost-effective fashion. The problem is that the final capital investment decision has not yet been made. RoPower was expected to make the go/no-go call by the end of 2025, but the decision has been pushed to the end of 2026 or early 2027.
Until NuScale Power has a signed deal, it's hard to assess the investment opportunity. To the company's credit, it isn't betting on RoPower alone. It has also partnered with ENTRA1 Energy and the Tennessee Valley Authority, as those companies look to jointly develop new nuclear power projects. However, as with RoPower, there's no signed deal.
The opportunity could be huge
Most investors should probably wait until NuScale Power has proved that it can build its nuclear reactors and that the technology works as expected before buying the stock. Indeed, there is a material long-term opportunity here that's much larger than the first sale. Small modular nuclear reactors could be a step change in the nuclear power industry.
The small size of SMRs should reduce their cost and improve their safety when compared with large site-built reactors. The smaller size and improved safety suggest that an SMR could be easily moved to where they're needed and placed closer to population centers. And given that they're built in a factory setting, SMRs should benefit from standardized construction processes.
NYSE: SMR
Key Data Points
While utility RoPower's plan to link six reactors is an example of how SMRs can be used, it isn't the most exciting. A far more interesting opportunity could be presented by data centers housing artificial intelligence. AI is a power-hungry technology that needs reliable power. Putting an SMR next to a data center to power it would solve many problems, including the need for the local utility to build electrical infrastructure to support the data center.
If artificial intelligence is the world-altering technology that many expect, NuScale Power could have decades of growth ahead of it as it helps to power the AI revolution. But that comes to pass only if NuScale Power gets its first sale and proves its technology.
Little harm in waiting
The opportunities ahead for NuScale Power are exciting. However, even the most aggressive investors may want to wait until the company has at least its first sale. Even after that point, it's likely to lose money for years as it ramps up its production. You would probably give up some capital gains if you wait to buy the stock, but the opportunity ahead isn't a one-time event. And waiting, perhaps even until the company is sustainably profitable, would protect you from the risk that NuScale Power fails to realize its potential.
