According to analysts from Bank of America, we are now entering a nuclear renaissance. “Nuclear energy has, in many ways, been recently ‘rediscovered’ amid surging electricity demand,” a recent report from the bank says. What’s causing this surge in electricity demand? One catalyst: artificial intelligence (AI).
In many ways, betting on the two nuclear stocks below is a clever way of exposing your portfolio to the upside from the world’s rapidly growing appetite for AI.
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Since the year began, shares of NuScale Power (NYSE: SMR) have lost roughly one-third of their value. The company’s market cap is now down to just $3.7 billion. The total potential value of the nuclear renaissance, however, is estimated to be somewhere around $10 trillion. Bank of America believes the technology could hold “the answer to the world’s power shortages.”
Clearly, there could be huge upside to investing in NuScale Power at these prices. But it’s important to understand the details. The company’s ticker symbol is SMR. This is no mistake: SMR is an acronym for small modular reactors, a specific approach to nuclear technology that has yet to take off at scale.
This approach is, as the name suggests, smaller than conventional plants with the option for modularity. That is, these types of nuclear plants can theoretically be scaled up over time. They can also be converted into bespoke plants of any size without needing to reinvent the foundational model for each customer.
The company’s SMR strategy is very different from the competing nuclear company discussed next. At its core, NuScale will design and manufacture its SMR modules. A separately financed partner, ENTRA1, will be responsible for developing and operating each specific project. It’s a novel approach, and ENTRA1 has already signed an agreement with the Tennessee Valley Authority for a 6-gigawatt project.
Here’s the issue: NuScale Power has scrapped or delayed customer agreements in the past. And we don’t yet have clear cost or timeline estimates on the aforementioned deal. It will likely be years until its first reactor is put into service. The company below, however, is much closer to the finish line.
If you’re going to bet on SMR stocks, look for companies most exposed to the AI sector. After all, it is the global data center building boom that is fueling electricity demand’s growth potential. “This potential has more momentum than before,” said Timothy Fox, managing director at ClearView Energy Partners. “There are data centers looking for firm and dispatchable and clean generation, and nuclear power can cover that.”