NuScale Power (SMR +14.36%) has had an exciting few weeks. Over the past 30 days or so, shares have surged in value by more than 20%. When you zoom out, however, the picture changes dramatically. Since setting an all-time high last October, the stock has lost roughly 77% of it value, sending the stock price plunging from more than $50 to just $13.
Right now, NuScale Power's market capitalization hovers around $4.3 billion. Yet according to new research, the company is chasing a $10 trillion global opportunity. Even Oklo (OKLO +16.44%) -- another promising nuclear stock specializing in small modular reactor (SMR) technology -- has a market value nearly three times higher than NuScale's.
Is NuScale stock a buy now that shares trade well under $50? If you're looking for growth stocks with maximum upside potential, then yes. But there are two things to keep in mind before jumping in.
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1. Don't expect NuScale's technology to take off overnight
SMR investors should be excited about the latest research coming out of Bank of America. "According to BofA Global Research, nuclear energy has, in many ways, been recently 'rediscovered' amid surging electricity demand," the bank's report begins. "Compared with other energy sources, it offers reliable baseload power, a smaller carbon footprint, and a higher energy return on investment." In total, the bank predicts a $10 trillion global opportunity for nuclear technology over the coming two to three decades.
Comparing a $10 trillion global opportunity to NuScale's $4.3 billion market cap creates an enticing picture. And as I've argued in recent weeks, I expect a decent chunk of this spending to eventually be allocated toward SMR systems versus larger conventional nuclear plants. But when you dig into Bank of America's report, one thing becomes clear: The SMR opportunity that companies like Oklo and NuScale are pursuing won't materialize in any meaningful way until 2030, or even 2035.
The problem isn't necessarily near term demand, though there are remaining concerns over how much artificial intelligence companies and data center operators are willing to bet big on this relatively untested technological approach to nuclear. The most immediate challenge to SMR systems taking off is simply construction times. NuScale, for example, doesn't expect its first system to come online until roughly 2032. Other SMR businesses are also targeting their first projects to be completed sometime after 2030, even though construction has already begun.
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2. Expect extreme volatility from every SMR stock
Like Bank of America's analysts, I don't expect SMR demand to pick up significantly until there are many more real-world examples deployed under today's conditions across several geographies. (Note: the only two SMRs in operation today are both in Asia, with construction initiated over a decade ago.) That means there will be a long wait until SMR businesses like NuScale hit any meaningful inflection point for mass growth.
In the meantime, expect the share prices of SMR stocks like Oklo and NuScale to be extremely volatile. That's what happens when expected revenues are modeled years or decades into the future. Small changes in risk tolerance can have a huge impact on the discount cash flows. So while NuScale and SMR technology in general has a promising growth trajectory long term, investors should expect a lengthy and bumpy holding period.
