There are a variety of nuclear energy stocks to choose from. Two of my favorite long-term picks are NuScale Power (SMR +1.63%) and Oklo Inc. (OKLO +5.72%). Both of these companies are developing nuclear technology based on small modular reactors, or SMRs. A growing number of analysts think that SMRs will play a key role in our energy future.
"Amid surging electricity demand, driven in part by the rise in AI/data centers, nuclear energy offers a potential solution," observes a recent research report published by analysts at Bank of America. "And new advancements in technology may now make the tipping point in sight for small modular reactors (SMRs) to reshape nuclear energy supply chains over the next decade."
In total, Bank of America thinks that nuclear energy is about to experience a $10 trillion renaissance thanks to surging electricity demand -- a trend almost completely fueled by the rise of energy-hungry AI technologies. "SMRs could likely reshape nuclear power supply chains over the next decade, given the major benefits over conventional power plants," Bank of America's report concludes.
SMR stocks like Oklo and NuScale have huge upside potential given these growth tailwinds. But which stock ultimately offers the most upside potential? The answer might surprise you.
NYSE: SMR
Key Data Points
Oklo and NuScale Power are very different businesses
On paper, the opportunities both NuScale and Oklo have ahead of themselves are quite similar. Experts predict that trillions of dollars will be spent over the next few years to build new data center infrastructure. This is critical infrastructure that artificial intelligence applications need in order to be trained and executed. There's just one problem: Data centers are energy-intensive, and our current energy supplies aren't enough to meet their rapidly growing needs.
"Capital is pouring into data center development, but there are real constraints on growth," warns a report published by global consultancy McKinsey & Co. "Incumbents can't meet demand for power," this report concludes.
This is what makes SMR technology so enticing. Due to their smaller designs, these innovative nuclear plants can be built faster and more cheaply than their larger counterparts, with smaller footprints, better safety metrics, and lower CO2 emissions. Right now, the data center and AI industries are racing to build huge amounts of reliable, clean energy generation capacity. SMRs look like a perfect fit.
There are critical differences in how Oklo and NuScale are approaching this opportunity, however. Understanding the differences is key to making an investment decision.
Image source: Getty Images.
I've already written about how both Oklo and NuScale stocks can make you rich over the long term. But each company's path toward generating this wealth will be very different.
Oklo appears to be taking a more bespoke approach, pitching its technology directly to AI data center companies. Its customer pipeline is full of end users who want to use the potential energy-generating capacity for their own purposes. As such, Oklo's designs are generally smaller in scale than NuScale's. That's because NuScale is generally targeting utility-scale deployments. NuScale's deal with TVA -- a public utility operating in Tennessee, Alabama, Mississippi, Kentucky, Georgia, North Carolina, and Virginia -- is for a 6 GW system. Many of Oklo's deals, meanwhile, are for sub-gigawatt deployments.
Which go-to-market approach will ultimately win out? Both strategies make sense in their own right. Data center operators want reliable energy fast, and don't necessarily want to be tied to grid supply and pricing. Most data centers, however, will still rely on grid power, meaning that utilities themselves will need to expand their own energy-generating abilities. TVA seems to believe that SMRs can help it meet this need.
The combined market caps of both Oklo and NuScale remain below $20 billion -- far less than the total addressable market. While there is competition in the form of private companies and more diversified conglomerates, buying both NuScale and Oklo creates a more balanced bet on SMR technology in general. That may be the best strategy for investors looking for maximum upside potential related to the growth in SMRs.
