Throughout history, the best businesses have succeeded by lowering their costs of production and making their products more affordable to the masses. Think: Ford Motor Company and the Model T, Walmart and everyday low prices, McDonalds, Amazon, and Netflix. Each of these blue chip giants became profitable by cutting operating costs and lowering prices, incentivizing folks to pick them over pricier competitors.
In every industry, this logic holds -- even in nuclear energy, where we're currently on the cusp of what could be a great resurgence. Nuclear energy companies like Oklo (OKLO +5.52%) and NuScale Power (SMR +1.58%) are advancing new technologies that can make reactors smaller, factory-fabricated, less expensive to build, safer, and more affordable than the average nuclear power plant. The power they generate is cleaner than fossil fuels, and their small modular design appeals to big businesses that need to generate their own power -- namely, data centers and utilities companies.
Oklo and NuScale are both expected to drive huge growth in the nuclear sector in the coming decades, taking part in a market opportunity that Bank of America (BAC +0.00%) has valued at $10 trillion. Between the two, however, one seems like a better long-term buy.
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Oklo: A better long-term buy if you believe AI data center growth is real
Oklo's business model might be more suitable for data center operators. In a nutshell, it wants to sell reliable, round-the-clock power from its reactors through power purchase agreements. It does not want to sell physical, concrete reactors; it wants to deploy them to customers and earn revenue on the electricity generated.
That model seems well-fitted for data centers and other industrial companies because, frankly, they don't want to be power plant owners either. They want clean, dependable power, but they would rather leave licensing and operating complexity to a utilities expert.
NuScale's model is similar to Oklo's but a little more complex. Unlike Oklo, NuScale doesn't want to become an independent power producer (IPP); rather, it wants to sell its small modular reactor (SMR) technology. In this regard, it has partnered with ENTRA1, an independent energy company, to sell its technology globally. In other words, NuScale provides the reactor smarts, while ENTRA1 finds the clients.
NYSE: OKLO
Key Data Points
Both companies offer clients on-site power generation through small nuclear reactors. Yet, of the two, Oklo is the only one handling everything in-house. That direct model could be more appealing than NuScale's multiparty approach because it offers a simple pitch: Let Oklo handle the reactors, and let the client purchase the power.
There might be a speed advantage to this, as well. Tech companies are trying to build data centers at a rapid clip, and Oklo's model could one day match this speed better than NuScale's tripartite system. It could be why, to this day, Oklo has major partnerships with data center clients, like Equinix, Switch, and Meta Platforms, whereas NuScale hasn't inked a major deal with one yet.
NuScale: A better pick for regulatory certainty
The risk, of course, is that Oklo still needs to prove this pitch is economically feasible. Unlike NuScale, Oklo doesn't have NRC approval for its reactor designs. And while NuScale's model is slightly less straightforward, the company can lean on partners to help shoulder the nitty-gritty of nuclear projects.
NYSE: SMR
Key Data Points
NuScale's partnership with ENTRA1 has already produced one potentially big project: The 6 gigawatt (GW) SMR plant for the Tennessee Valley Authority (TVA) using NuScale's technology. If this project goes through, it would result in the largest SMR deployment in the U.S.
Both these stocks have potential to explode in value as artificial intelligence (AI) and its data centers demand more power. Between the two, however, I see Oklo emerging as a data center's go-to for on-site power generation, with NuScale more than likely partnering with utilities.
