NuScale Power (NYSE: SMR) is thinking big by thinking small, which is why it has attracted the attention of Wall Street. As a result of that attention, the stock is up well over 150% over the past year. That's a lot of growth over a relatively short time, which raises question about how much more growth is likely.
If you are a more aggressive investor, there are some very good reasons to like the company's future prospects. Here's why you still might want to buy NuScale Power today.
What does NuScale Power do?
Right now NuScale Power doesn't actually have a product to sell. It just has a big idea, which is to make small-scale modular nuclear power plants. It is in the process of trying to get its plant plans approved, which is no easy task. Because nuclear meltdowns, though quite rare, can have very material and long-lasting impacts, regulations are ponderous in the nuclear power sector. NuScale's next regulatory hurdle will come in mid-2025.
Image source: Getty Images.
The big selling point for what NuScale is trying to do, however, comes down to the small size of the reactors it is proposing to build. Some of the biggest drawbacks when it comes to nuclear power are the cost and complexity of building large-scale power plants. Further, because of the size of existing nuclear power plants, when there is an accident or meltdown, the scale of the problem is just as big as the power plants. This is part of the reason why nuclear power has been shunned for so long despite producing carbon-free power.
NuScale's small-scale modular nuclear reactors would be built in a factory, simplifying the process and reducing costs. The modular design would allow them to be smaller and, thus, safer. And while small reactors would produce less power, they can be linked together to create a larger power plant. There's also the not-so-subtle fact that small reactors can be transported and installed in more remote areas, making them convenient and far more flexible than immovable large-scale power plants. If NuScale gets the approvals it needs it could have a bright future ahead of it.
Nuclear power is in the news
NuScale isn't the only player in nuclear power in the U.S. at the moment. There were two new large nuclear reactors attached to the grid in early 2024 by Southern Company . And there are now two shuttered nuclear reactors that are going to be restarted, one of which is privately owned while the other is owned by Constellation Energy . It looks like nuclear power is increasingly important in the utility industry .
The problem is that building a new power plant is incredibly difficult even though it appears to be getting legal and regulatory support. Building a new plant from the ground up takes years to complete, noting that Southern Company's effort was long delayed and billions over budget. This is why restarting shuttered plants looks like such a good idea. But if NuScale gets the nod to build its modular reactors, it could easily end up with a backlog that could take a decade or more to fulfill. It's also interesting to note that Microsoft has agreed to buy all of the power from the plant Constellation Energy is planning to reopen as the tech company looks to build out its data center operations.
NuScale could meet the same demand but with a more nuanced solution. A modular reactor could simply be installed right next to a data center, reducing the need for electric utilities to produce more energy and install the infrastructure to get it to the facility. Unfortunately, the word "if" comes in again, because NuScale's bright future only comes to pass if its modular reactors get approved. And even then there's more work to be done because the company has to ramp up production.
An exciting but risky buy
While most investors can probably see the attraction of NuScale Power's business prospects, most investors will also want to wait for the company to reach a few more milestones before buying it. In other words, this risky (and unprofitable) company is not a buy for the vast majority of investors.
But, if you are an aggressive investor and you want to get in early because you believe that NuScale has the right product at the right time, the stock could be worth buying. Just don't bet the house on it because there's a long way to go before this business is likely to see black ink. To put some numbers on that, it lost $0.31 per share in the second quarter of 2024, more than twice the $0.13 per share it lost in the year-ago period.
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Reuben Gregg Brewer has positions in Southern Company. The Motley Fool has positions in and recommends Constellation Energy and Microsoft. The Motley Fool recommends NuScale Power and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy .
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