Nuclear energy stocks are in the spotlight after Alphabet's (GOOG) (GOOGL) Google recently secured a landmark energy deal with privately held Kairos Power. Last week, Google became the latest “Magnificent 7” company to jump on the nuclear energy bandwagon when it announced a deal to purchase power from small modular nuclear reactor (SMR) developer Kairos Power. The partnership is considered as an important demand signal to the market, as these investments will accelerate the commercialization of nuclear energy.
Google’s senior director for energy and climate, Michael Terrell, stated, “We believe that nuclear energy has a critical role to play in supporting our clean growth and helping to deliver on the progress of AI.”
After the deal was announced, shares of NuScale Power (SMR) rallied by over 40% in a single trading session on Oct. 16. NuScale Power develops and sells modular light water reactor nuclear power plants to supply energy for electrical generation, district heating, hydrogen production, and other process heat applications. It offers the NuScale Power Module, a water reactor that can generate 77 megawatts of energy.
In 2024 alone, NuScale stock has surged over 440% as demand for nuclear power continues to gain widespread attention, valuing the company at $4.6 billion by market cap.
After its breakout performance lately, let’s see if NuScale Power stock is a good investment right now.
The Bull Case for NuScale Power Stock
The key reason for the spike in NuScale Power stock this year is the rising number of partnerships between big tech giants and energy companies. The widespread adoption of generative AI platforms has increased the energy demand for data centers.
In the last few months, Microsoft (MSFT) has partnered with Constellation Energy (CEG) to power its data centers; Amazon (AMZN) purchased a data center from Talen Energy (TLN), which is fueled by a nuclear power plant; and billionaires such as Bill Gates, Jeff Bezos, and Sam Altman have all invested in nuclear energy companies.
According to a CNBC report, just three SMRs operate globally, all of which are outside the U.S. Because commercial-scale nuclear reactor projects are expensive, companies are turning to SMRs to scale up nuclear power. Google expects the first SMR to be online by 2030, and several other reactors will go live in the following five years, adding 500 megawatts to the grid.
NuScale Power is part of a rapidly expanding addressable market. An IDTechEx report projects the SMR market to be worth a whopping $295 billion in 2043, up from $72 billion in 2033, indicating a compound annual growth rate of 30%.
Is NuScale Power Stock a Good Buy?
NuScale Power is the only company to have its SMR design approved by the Nuclear Regulatory Commission in the U.S. In late 2023, the company secured key data center contracts with Standard Power, with two facilities in Ohio and Pennsylvania set to be operational by 2029.
As the company is effectively pre-revenue, it remains a high-risk investment in 2024, despite rising demand.
Out of the eight analysts covering SMR stock, the consensus is a “moderate buy,” and the stock has outpaced its average price target of $11.42. The Street-high target of $21 implies that SMR could rise up to 17.5% from here.
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On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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