NuScale Power: 1 Catalyst That Will Make or Break This Nuclear Stock
Key Points
Nuclear power looks to have a bright long-term future.
NuScale's future will be dictated by a near-term catalyst.
The artificial intelligence (AI) boom is fueling a nuclear renaissance. For the industry to grow, massive amounts of energy-intensive compute power will need to be built. As a low-carbon, high-baseload energy source, nuclear power is a promising solution.
NuScale Power (NYSE: SMR) is the only small modular reactor (SMR) developer in the U.S. approved by regulators to construct an SMR facility. SMRs are ideal for the AI data center build-out, given that they can be built more quickly and at a lower cost than conventional nuclear plants. This smaller footprint allows an SMR to be constructed near the data center infrastructure itself.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
Despite growth potential, NuScale shares are down 40% this year. Skepticism is reasonable. Only two SMR systems currently exist worldwide. NuScale has never commercialized any of its SMR designs. Plus, the company already experienced a sizable failure in 2023 when its biggest customer (at the time) canceled its project.
While NuScale operates in an industry that should see long-term growth, the nuclear stock's future may hinge on a single upcoming catalyst.
This catalyst could make or break NuScale Power stock
NuScale's technology has already been approved by U.S. regulators. The company is now waiting for a customer to commit financially to building an SMR system. NuScale already signed a non-binding deal with its financing partner, ENTRA1, and a major U.S. utility, the Tennessee Valley Authority (TVA), for a 6-gigawatt SMR facility. The deal is non-binding, however, allowing the partners to pull out at any time -- a risk that NuScale has faced in the past.
Image source: Getty Images.
The next step is for the TVA to sign a power purchase agreement, or PPA. That would commit the utility to buying long-term power from the project.
If secured, a PPA would validate NuScale's SMR designs, its go-to market strategy, and its ability to convert non-binding deals into revenue-generating projects. NuScale's CFO wants to get a deal done by the end of 2026. The signing of a PPA -- or the inability to do so -- should have a massive impact on NuScale's stock price, as well as its long-term future.
Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.