The world is witnessing a nuclear energy generation renaissance, with governments and companies constructing and restarting nuclear power plants due to their potential in meeting the increasing electricity demand from AI and electric cars. Despite environmental groups’ opposition to nuclear energy for decades, its near-zero carbon emissions after construction are making it a favorable option.
In the coming decades, billions will be invested in nuclear power, but there are limited publicly traded nuclear energy stocks available. NuScale Power Corp (NYSE: SMR) is one such company that plans to change the market with its small modular reactors (SMRs) and has seen its shares increase by nearly 500% this year.
The growing demand for nuclear energy primarily comes from two areas: electric cars and data centers. Electric vehicles now account for 19% of new automotive sales in the US, up from virtually zero a decade ago. This transition from gasoline to electricity will significantly increase demand for electric power generation.
The second factor is the rapidly growing data center market in the US, fueled by AI demand, which is expected to consume 9.1% of US electricity by 2030. Microsoft and Amazon, the two largest data center providers, are signing long-term deals with electric utilities to build or restart nuclear power plants to meet this demand.
NuScale Power aims to address the issues with nuclear power through its SMR technology. These reactors are smaller, scalable, and have a repeatable process, making them cheaper and potentially quicker to market. However, NuScale Power is yet to sell an SMR and has virtually zero revenue today. Despite many proposed deals, none are operational, and if they ever materialize, it will be no sooner than 2030.
In the meantime, the company is burning through cash, with a negative free cash flow of $170 million over the last 12 months. While investors are excited about SMR technology, they may be overlooking the potential risks. NuScale Power trades at a market cap of $1.7 billion with no revenue, and shareholders may face headwinds from stock offerings or debts within the next 12 months.
Furthermore, the SMR technology is unproven and unclear if utilities prefer these solutions over traditional large nuclear reactors. NuScale Power is a pre-revenue business that may remain so through 2030. Despite the stock’s soaring growth, smart investors should avoid this risky stock and explore other investment opportunities.