It's a great time to be a nuclear energy investor. Over the next few decades, nuclear energy will become a $10 trillion opportunity. At least that's the conclusion of a recent research report from analysts at Bank of America.
"The U.S. grid is facing an extended period of load growth," the report observes. Electricity demand is on the rise because of several factors, including the electrification of the transportation sector, rising industrial demand, and, most critically, the continued build-out of energy-intensive data centers to serve the burgeoning AI industry.
"If load growth forecasts continue to rise," the report warns, "utilities will need to invest to meet required reserve margins and increase spending on both power generation and transmission and distribution capacity."
If utilities are spending to increase power generation, which energy sources are likely to benefit most? Bank of America has a clear answer.
"[N]uclear energy has, in many ways, been recently 'rediscovered' amid surging electricity demand," the bank concludes. "Compared with other energy sources, it offers reliable baseload power, a smaller carbon footprint, and a higher energy return on investment."
For this reason, investors have been flocking to two innovative nuclear energy stocks: NuScale Power (SMR -0.90%) and Oklo (OKLO +0.28%). Each stock, however, has a very different growth profile. Investors should understand one key difference.
NYSE: SMR
Key Data Points
NuScale Power and Oklo are very different nuclear energy stocks
Most of Bank of America's projected nuclear energy opportunity will be met by increased supply of conventional power plants. These large plants can take a decade or more to fully build and get online. But once they're operational, they can provide reliable baseload power for decades at a time.
NuScale and Oklo are taking a different approach. These companies specialize in a relatively novel approach to nuclear that uses small modular reactors, or SMRs.
Small modular reactors are like traditional nuclear fission reactors, but have smaller capacities ranging from 20 MWe to 300 MWe per module. They are prefabricated and can -- at least on paper -- be deployed faster and more cheaply than larger conventional nuclear power plants.
"If commercialized, SMRs would offer five major advantages over conventional, large-scale nuclear power plants," stresses Bank of America. Those advantages include better affordability, enhanced safety, modularization, smaller footprints, and reduced CO2 production.
Image source: Getty Images.
Here's the problem: Only two SMRs are currently operating globally, even though the concept has been around for decades. Dozens of SMR sites are now under development around the world, but real-world adoption remains to be seen.
This is where the main difference between Oklo and NuScale emerges. Each company has a very different go-to-market strategy.
NuScale is focused on utility-scale deployments. It has, for example, agreed to build a 6 GW system for the Tennessee Valley Authority that will serve the eastern U.S. This massive SMR system will plug directly into the grid, serving a variety of end markets.
Oklo, on the other hand, is marketing its relatively smaller systems directly to data center companies and cloud computing operators. For example, it has agreed to a deal with Meta Platforms on a 1.2 GW SMR system to power its AI data centers. Oklo's AI focus makes sense when you consider that Sam Altman -- the CEO of OpenAI -- was an early investor in the company and served as its chairman for many years.
To be clear, there are many other SMR companies seeking to deploy this type of nuclear system. According to the Nuclear Energy Agency, more than 120 SMR designs are now in some sort of licensing and development process. Many of these systems are being developed by diversified industrial conglomerates with deeper pockets than Oklo or NuScale.
Still, Oklo and NuScale present perhaps the cleanest way for investors to bet on the rise of SMRs and nuclear in general. And there's no reason investors need to choose between the two. Even if just one is successful, the realized growth should be enough to compensate for the other's failure. When choosing between Oklo and NuScale, investors should consider buying a balanced basket of both.
