NuScale Power Is Interesting, but Here's What I'd Buy Instead
Key Points
NuScale could be an attractive energy source as tech giants monitor nuclear energy developments.
However, NuScale is years away from commercialization, which makes it a very risky stock.
Axcelis Technologies is a contrarian pick due to its ion implantation technology. The company is shifting its focus from the EV industry to AI infrastructure.
NuScale Power (NYSE: SMR) may fulfill the next wave of artificial intelligence (AI) energy demands with its small modular reactors. The company aims to deliver reliable, carbon-free nuclear power that doesn't put stress on the power grid.
The company won't be commercialized for a few years, but it has made progress with its designs. The U.S. Nuclear Regulatory Commission approved NuScale's power design for a 462-megawatt small modular reactor power plant last year, which is a big benchmark for the company.
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However, the entire thesis depends on NuScale Power quickly scaling revenue once it is commercialized. Meanwhile, the stock trades at a market capitalization of $5.6 billion, which is after it lost nearly 65% of its value from its all-time high.
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You don't have to pick a speculative growth stock to ride the AI boom. Axcelis Technologies (NASDAQ: ACLS) caters to investors who aren't afraid of risk and believe in comeback stories. It also has real revenue and profits, unlike NuScale Power.
Explaining the multiyear drop in Axcelis Technologies stock
Axcelis Technologies has increased by more than 180% over the past five years, but its shares have also declined by more than 50% from their all-time high, which was reached in 2023. Axcelis specializes in ion implantation, a technique that produces transistors in electronics. These transistors are essential for semiconductors to function, including those used in AI chips.
Since almost anything related to AI has experienced robust growth over the past few years, it may be surprising to see that Axcelis is still well below its 2023 highs. That's because the company's primary revenue driver was EV demand.
Being a key player in the EV industry worked well for Axcelis during the COVID-19 pandemic and shortly after it. In less than three years, Axcelis stock went from roughly $30 per share to briefly touching $200 per share. That was from 2021 to 2023.
Axcelis is shifting its focus toward AI
EV sales have slowed down since 2023, and Axcelis' stock price movements from mid-2023 to the end of 2024 reflect this. The expiration of EV tax credits in 2025 made it even worse, but Axcelis still managed a 16% gain over the past year.
Axcelis' gains despite a slowing EV market come down to its focus on AI. The company's ion implantation technology is just as critical for AI chips as it is for electric vehicles. Axcelis reported a 17% year-over-year revenue decline in Q3 but highlighted AI as a major growth opportunity for the future.
The company's past successes with the EV market and its ability to gain market share quickly from 2021 to 2023 demonstrate good leadership. Axcelis is also merging with Veeco Instruments in the hopes of building a leading semiconductor equipment company.
Axcelis' Q4 guidance suggests revenue will drop yet again year over year. However, the pessimism built around the stock has resulted in a 20 P/E ratio.
If the combined company can gain AI market share and achieve growth rates similar to what investors saw from 2021 to 2023, Axcelis looks like a contrarian pick at current levels. The company should achieve its goals well before NuScale Power finally builds and commercializes one of its nuclear power plants.
Marc Guberti has no position in any of the stocks mentioned. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.