Experts from Bank of America believe nuclear energy will soon be a $10 trillion opportunity.
"Nuclear energy has, in many ways, been recently 'rediscovered' amid surging electricity demand," a report from the bank recently concluded. "Compared with other energy sources, it offers reliable baseload power, a smaller carbon footprint, and a higher energy return on investment."
Want to profit from the rediscovery of nuclear energy? There are two reasons why Oklo Inc. (OKLO -8.52%) could be your best bet. In fact, buying shares at today's valuation could set you up for life.
NYSE: OKLO
Key Data Points
1. Expect AI companies to invest heavily in nuclear energy
Electricity demand in the U.S. is on the rise. Through 2030, electricity demand is expected to rise by around 4% annually. But much of that growth stems from a single source: AI companies. Through 2030, the artificial intelligence (AI) sector is expected to triple its demand for electricity, going from a 4.3% share of U.S. electricity demand to 11.7%.
AI applications rely on data centers for storage and compute. These data centers require a huge amount of electricity to operate, particularly for cooling red hot graphics processing units (GPUs) that power most of AI's capabilities. So when you hear people say that AI requires a huge amount of electricity to function, they're really talking about the data centers that these technologies rely on.
There's just one problem: The electricity industry isn't entirely ready to deliver on these new power demands. For over a decade, electricity demand in the U.S. was largely flat due to continued efficiency gains. The emergence of AI's power-hungry needs is new and relatively unexpected. In response, big tech companies themselves are investing billions of dollars into new energy generation projects, including restarting shuttered nuclear plants. It is this emerging need for fresh sources of power that is driving Oklo's potential.
Image source: Getty Images.
2. Oklo's valuation is compelling but not without risk
After a sharp correction of over 40%, Oklo's market cap is now down to just $9.5 billion. That's peanuts compared to what Bank of America believes could be a $10 trillion global opportunity. Indeed, if Oklo's small modular reactor (SMR) technology succeeds and is adopted heavily by the AI and tech industries, it's likely that today's trading price proves a steal for patient investors. But there are some important risks to be familiar with.
First, Oklo isn't the only company looking to supply AI businesses with innovative nuclear designs. Pure play competitors like NuScale Power exist, as well as diversified industrial competitors with far deeper pockets and more proven project history. Second, nuclear power plants of all sizes rely on uranium to function. Yet some experts believe uranium markets will tighten heavily over the next decade, potentially discouraging otherwise keen customers. Third, Oklo's diminutive size not only provides generous upside opportunity but also risk in terms of access to capital. To raise billions in additional capital -- something Oklo will likely due in the future -- existing shareholders may be heavily diluted, lowering their overall profit potential.
Despite these risks, I'm still optimistic about Oklo over the long term. Nuclear energy is clearly a priority for big tech firms. SMR technology like Oklo's makes a lot of sense on paper for delivering quick, reliable, scalable power to AI data centers. Plus, the technology has other end-market fits, like remote communities and military installations. Just understand that this is an opportunity that will play out over decades, not months or even years. Oklo's first project isn't expected to go into operation until 2028, and further delays are very possible. But if you're looking for a fortune-making stock and are willing to stomach volatility over a long holding period, Oklo is a promising candidate.
