Is This The Best Nuclear Stock To Buy Now?

When Bill Gates starts to pour money into a sector, it’s worth perking up to see why. After all, some of his largest holdings, such as Berkshire Hathaway and Waste Management, have been monstrous winners. Now he’s piling into nuclear, which begs the question Is  NuScale Power (NYSE: SMR) the best nuclear stock to buy now?

Groundbreaking Technology

NuScale sits on groundbreaking small modular reactor technology that has the potential to be a major driver in the clean energy transition.

The modular reactors NuScale offers can be scaled from 77 MW up to 924 MW in configurations that align with the requirements of various sectors, from power grids to data centers.

From an investor perspective, NuScale’s exclusive U.S. Nuclear Regulatory Commission design certification translates to a unique competitive edge, making it the only SMR approved for commercial use in the U.S. What Gates may be betting on is that the company becomes a preferred supplier as demand for clean energy surges.

Financial and Market Position

It’s no secret that you won’t be buying NuScale for its current revenues, which are paltry at best. The company also has a high cash burn rate, which isn’t a big surprise given that it’s at the frontier of new technology and needs to spend heavily both on its core offering and commercialization.

In Q2 2024, NuScale generated only $1 million in revenue, down from $5.8 million year-over-year, and reported a net loss of $27 million.

What’s concerning is the cash reserves that stand at $130.9 million. At the current liquidity burn rate, that gives NuScale about six quarters to generate meaningful revenue needed to stay afloat.

Fortunately, early commercial milestones are on the horizon with additional government and funding expected as projects ramp up​.

And sentiment in the industry has been on the rise too, with Amazon, Alphabet and Microsoft all signing nuclear deals of late.

What Can Drive NuScale Power Higher?

The growing power demands of AI and data centers are among the largest reasons that NuScale Power may continue its upward trajectory.

Goldman Sachs forecasts a 15% compound annual growth rate in U.S. data center power demand through 2030, driven by AI applications.

Advanced nuclear power, like NuScale’s SMRs, are likely to translate to stable and around-the-clock power that is crucial for data centers, especially during peak AI processing tasks, where renewable sources like wind and solar may fall short.

The fact that Amazon, Google, and Meta have already announced multi-billion-dollar investments in data center capacity means NuScale has the potential to capture a share of this market as a reliable solution​

Add to these drivers the substantial U.S. government backing, particularly the Department of Energy awarding the company grants for SMR research and commercialization as well as the Biden administration’s recent budget which supports SMR deployment with $900 million allocated toward commercial applications and regulatory streamlining.

NuScale’s project in Romania also puts international support into the spotlight thanks to backing from the Romanian government alongside multiple U.S. agencies, including the DOE, U.S. Trade and Development Agency, and the U.S. Department of State.

This project is slated to provide 462 MW in capacity and likely to demonstrate the strong international demand for NuScale’s SMR solutions.

NuScale’s partnership with Doosan Enerbility, a leading global foundry, to advance its production capabilities by facilitating the manufacture of NuScale Power Modules further hints at where the future lies for the stock.

Add to that the holding of Fluor Corporation, which has a majority stake in NuScale, and you end up connecting a lot of breadcrumbs and seeing this is a company with limited revenues so far but a whole lot of potential to commercialize and implement SMR projects.

Analysts Forecasts For NuScale Power

While there is lots to like about NuScale, analysts have mixed views. That’s not a big surprise given the massive upfront costs and unsteady revenue.

Price targets range from a cautious $5 per share to a more optimistic $21 per share.

If NuScale’s SMRs gain traction in power-intensive markets like AI, data centers, and international energy grids, the most optimistic projection is likely to be high conservative.

Successful deployment in Romania and additional deals in Eastern Europe or Asia may also serve as pivotal inflection points that make NuScale’s stock highly attractive to growth-oriented investors.

What Could Go Wrong?

Commercial nuclear projects face regulatory challenges, long lead times, and high development costs. Management’s progress on existing projects like Doicesti need to be closely watched to see whether success is on the horizon.

The good news is NuScale’s NRC-certified design, partnerships, and alignment with high-growth energy markets certainly offer enormous upside potential.

Is NuScale Power Stock a Buy Now?

For now, NuScale firmly sits in the high-risk, high-reward basket so investors who like the certainty of cash flows and dividends will do well to look elsewhere. Those who are willing to ride the train of share price volatility in the hopes of a big payoff down the line might do well to pay attention to NuScale Power.

As AI, industrial decarbonization, and government climate initiatives drive demand for reliable, zero-emission power, NuScale’s SMR technology stands out as a play that may be highly rewarding, if speculative.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.