The nuclear power industry might seem like a slow-growth market dominated by energy giants like NextEra Energy and Duke Energy. From 2024 to 2029, Markets and Markets expects the nuclear power market to only grow at a compound annual growth rate (CAGR) of 2.9% -- so it doesn't seem like a fertile market for speculative or higher-growth stocks.
But if we look beyond the big nuclear energy companies, we'll find smaller companies that are trying to disrupt traditional nuclear power plants with new reactors. Two of those companies are NuScale Power (NYSE: SMR) and Oklo (NYSE: OKLO). Both of these stocks are volatile and speculative, but they might be a smart place to park a modest $500 investment.
NuScale produces small modular reactors (SMRs), which are prefabricated, delivered, and assembled on-site. That modular approach reduces the costs and construction time for a working nuclear reactor, and they can be installed in vessels only 9 feet (2.7m) wide and 65 feet (20m) tall. That makes them much easier to deploy than larger nuclear reactors, and they can be set up in areas that aren't suited for bigger plants.
NuScale dominates this nascent market since its SMRs are the only ones that have been certified with a Standard Design Approval (SDA) from the U.S. Nuclear Regulatory Commission (NRC) so far. However, the NRC only certified its current SMR clusters to produce up to 55 megawatts of electricity.
For its SMR clusters to be more cost-effective than a coal-fired plant, they need to generate at least 77 megawatts of electricity. NuScale expects the NRC to certify the SDA for its 77-megawatt reactors in the near future.
The broader SMR market also has other catalysts on the horizon. The U.S. Department of Energy (DOE) recently offered up to $900 million in cost-shared funds to develop more nuclear SMRs, and Amazon plans to support its growing energy needs by funding the development of more SMRs.
That outlook seems bright, but NuScale has struggled with plenty of growing pains. In 2023, it canceled its plan to build six nuclear reactors in Idaho by 2030 as its costs skyrocketed. It laid off 40% of its employees a year ago, and it's consistently diluting its investors with its secondary offerings and high stock-based compensation expenses.
But from 2023 to 2027, analysts expect its revenue to rise from $23 million to $193 million as it gains more design approvals, secures new contracts, and scales up its business. It might not seem cheap at 12 times its 2026 sales, but it might just turn a $500 investment into thousands of dollars over the next decade if it maintains its leading position in the SMR market.
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Oklo is an even more speculative nuclear play than NuScale because it hasn't generated any revenue yet. But it's gained a lot of attention because Sam Altman, the CEO of OpenAI, served as its CEO for three years before handing the reins to the company's co-founder, Jacob DeWitte, in 2024. Altman remains on the board as Oklo's chairman and is still closely associated with the company.
Oklo develops microreactors, which are even smaller than SMRs. These reactors run on metallic uranium fuel, which is denser and cheaper to fabricate than traditional uranium fuel pellets. Its microreactors produce minimal carbon emissions, while traditional nuclear reactors can pump out two to 130 tons of CO2 per gigawatt hour (GWh) of energy produced. Oklo has also been developing a fuel recycling process that can extract over 90% of the remaining energy from unused fuel, and it expects the integration of that technology to eventually reduce its fuel costs by up to 80%.
Oklo's flagship microreactor, the Aurora, costs $70 million and can generate 15 megawatts of electricity. It would cost about $82.5 million to $121.5 million to construct a traditional nuclear reactor that generates the same amount of electricity. The Aurora reactors can be scaled up to 50 megawatts of electricity, and they can operate for over 10 years without being refueled. It's already working closely with the NRC and DOE, and it was cleared to build its first reactor in Idaho in 2019.
However, Oklo doesn't plan to bring its first reactor online until 2027. So, for now, it's hard to tell if its enterprise value of $6.2 billion is cheap or expensive relative to its growth potential. That would make it a risky stock to invest $5,000 in, but it might be worth a smaller $500 investment if you believe it can achieve its long-term goals.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Leo Sun has positions in Amazon. The Motley Fool has positions in and recommends Amazon and NextEra Energy. The Motley Fool recommends Duke Energy and NuScale Power. The Motley Fool has a disclosure policy.
The Smartest Nuclear Stocks to Buy With $500 Right Now was originally published by The Motley Fool
