The ongoing adoption of artificial intelligence (AI) is driving unprecedented demand for computing power, and hyperscalers are spending heavily to meet it. These projects are massive in scale and complex, requiring significant power and advanced cooling solutions, which align with Fluor's (FLR 2.51%) expertise in executing megaprojects.
The company also has a foot in the door on next-generation small modular nuclear reactors through its work with NuScale Power. Here's what investors need to know about Fluor and the long-term investment opportunity.
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Fluor's data center and nuclear energy opportunities
Last year, Fluor completed the engineering, procurement, and construction management for two co-location data centers in India and is also working on another project in Europe. The company is looking to translate this success into North America by targeting tier-one tech clients (hyperscalers) that are spending massively.
In addition, Fluor is positioned across the nuclear industry, which is experiencing a resurgence driven by the need for clean, reliable baseload power to support the grid. The company was an early investor in NuScale Power, accumulating a stake in the small modular reactor company in 2011.
Fluor is the only engineering and construction firm with experience in working with NuScale and is currently undertaking front-end engineering and design for the RoPower project in Romania. This project recently received the green light from shareholders of Romanian nuclear operator Nuclearelectrica (a joint owner of RoPower), who have approved the Final Investment Decision, on the condition that it would test one of NuScale's reactors first and move on to the remaining five units if the trial is successful.
On top of that, Fluor is part of a joint venture with BWX Technologies called PanTeXas Deterrence, which was awarded the management and operations contract for the Pantex Plant, a U.S. nuclear weapons facility. The joint venture serves as a contractor responsible for the assembly, disassembly, and life-extension programs for the U.S. nuclear weapons stockpile to ensure its safety and reliability.
The contract is valued up to $30 billion, but because Fluor has a non-controlling interest in the joint venture, it is accounted for as an equity method investment and doesn't appear in the company's backlog, making it a "hidden" source of revenue that provides recurring cash flow over the life of the contract.
NYSE: FLR
Key Data Points
An alternative way to play the data center and nuclear energy boom
There are potential risks. For example, while Fluor has data center deals in India and Europe, it has yet to announce any major deals in North America. The company is being highly selective about which projects it will take on and is passing on smaller data center projects that do not meet its new, stricter criteria. In addition, SMRs are still in the early stages of commercialization. For example, NuScale's project in Romania is still very early on, and the success of this technology remains up in the air.
That said, Fluor is taking steps to shore up its balance sheet and make its business more resilient. The company is selling its stake in NuScale to raise capital for share repurchases and shifting to reimbursable contracts to protect against project cost overruns. If you're looking to capitalize on the AI and nuclear energy boom, Fluor is an appealing stock to consider today.
