Nuclear power is undergoing a renaissance. Electricity generation demand is growing like a weed due to the artificial intelligence (AI) boom, and investors are looking for the right horse to bet on in the race. Some have been drawn to NuScale Power (NYSE: SMR), a new-age nuclear power company seeking to kick-start the small modular reactor (SMR) industry.
Shares of NuScale Power went from a low of around $2.50 in late 2023 to a high of $60 last year. Today, the stock has dipped back down below $15. Does that make it the next buy-the-dip candidate and a potential nuclear millionaire maker?
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An unfortunate downside of the traditional nuclear power industry is the massive up-front capital costs. It may take billions or tens of billions of dollars to build a large nuclear power plant, which can be profitable but requires significant backing from governments, utilities, or large corporations ahead of time.
NuScale Power has designed a system that is much smaller and modular, meaning it can be manufactured for lower electricity needs and then scaled up as electricity demand grows. It has even had some of its designs approved by the Nuclear Regulatory Commission (NRC), making it one of the few companies in the world to pass this intense regulatory scrutiny.
The idea is that NuScale Power will help utilities grow their nuclear power capabilities. With AI, electricity demand around the globe is driving potentially hundreds of billions of dollars of incremental spending a year on electric power, which could prove to be a boon to a company like Nuscale Power.
The problem with NuScale Power, and what should concern investors, is the lack of contract wins for the business. If there were truly an indefinite demand for nuclear electricity in this time of massive industry bottlenecks, you would think NuScale Power would be winning contracts left and right, especially because its reactor design has been approved by the NRC.
In fact, NuScale Power has won zero contracts related to actually building nuclear reactors for customers. It has won some exploratory deals, which drive a little revenue, but nothing substantial. It previously had a contract in Utah, but it was cancelled due to cost overruns.
In what is perhaps the best time to be in the power business in history, NuScale Power cannot win a single deal. This should be a flashing alarm to investors. With close to zero revenue, huge free cash burn, and a rapidly rising share count, NuScale Power stock looks like the opposite of a millionaire maker.
