Forget Oklo: This Nuclear Stock Could Be the Better Buy
Key Points
Oklo has a promising business model and customer pipeline.
A competing nuclear power stock appears more attractive after a steep decline.
- 10 stocks we like better than NuScale Power ›
On paper, Oklo (NYSE: OKLO) -- one of the most popular nuclear energy stocks on the market today -- has a very bright future.
Investment banks, consultants, and market analysts anticipated as much as $7 trillion in spending by 2030 to scale artificial intelligence (AI) data center infrastructure. Without this critical infrastructure, the AI industry will find it very difficult to grow as quickly as investors demand.
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A large chunk of that $7 trillion will be spent on materials and labor. Much of it, however, will be directed toward scaling the energy systems needed to power the data centers themselves. "Incumbents can't meet demand for power," according to a report from consulting firm McKinsey & Co. The need for more power, the firm concludes, will trigger "one of the largest infrastructure build-outs in modern history."
Sam Altman, the chief executive officer of OpenAI, recognized this challenge more than a decade ago. In 2015, he became an early investor in Oklo. Oklo's small modular reactor (SMR) designs are ideal for the rising energy needs of the AI industry. The company has already secured deals with big tech companies like Meta Platforms (NASDAQ: META).
There's just one problem: Oklo still isn't approved by regulators to commercialize any of its SMR designs. So although some of its deals have binding financial components, Oklo won't be able to execute on its customer pipeline until it receives the proper approvals. Oklo was denied by regulators in 2022 and later resubmitted its application in 2025. The application has been moving smoothly through the approval process, but the exact date for a potential full approval remains unknown.
As a business, Oklo is incredibly exciting. It has impressive industry backing, an influential investor base, and good odds of full regulatory approval. When it comes to Oklo as an investment, however, the situation is less clear. Oklo's $8 billion valuation is nearly twice that of another SMR competitor, which is approaching a critical milestone that probably will push its valuation above Oklo's.
This nuclear stock could have more near-term upside than Oklo
NuScale Power (NYSE: SMR) is very similar to Oklo. Both companies are pursuing the development of SMR technology. Both companies have an impressive customer pipeline. And both companies are benefiting from AI's rapidly rising demand for power.
NuScale's market cap, however, currently hovers at about $4.6 billion after a steep decline. That's a near-50% discount to Oklo. And yet NuScale has received regulatory approval to commercialize its designs, while Oklo remains in the application process. Plus, NuScale's biggest project -- a 6-gigawatt deal with a major U.S. utility -- is nearing a critical milestone.
Up until now, customers have been reluctant to commit financially to SMR deals in any meaningful way. Oklo's deal with Meta, for example, included just $25 million in commitments. That's a drop in the bucket compared to what could become a multibillion-dollar project. And while Oklo has indicated that there may be additional binding agreements in the contract, it's not entirely clear how much Meta would be on the hook for should it decide to pull out.
Image source: Getty Images.
NuScale is arguably in a worse situation. Its biggest project, with the Tennessee Valley Authority, has little to no financial commitments. That has caused the market to price the stock at a healthy discount. That discount, however, could narrow quickly by the end of this year.
On last quarter'searnings call NuScale's management stressed that ENTRA1, its financing partner, "continues to advance discussions with the Tennessee Valley Authority toward a definitive power purchase agreement." Chief Executive Officer John Hopkins clarified that "as soon as these PPAs (power purchase agreements) are definitized, we're ready to move." Later in the earnings announcement, NuScale's chief financial officer indicated that a PPA could be concluded by the end of 2026.
A PPA essentially binds a customer to buying power from a power generation facility. In short, it ensures that NuScale will be paid, clearing the way for construction to begin.
If a PPA is signed this year, NuScale would leapfrog over Oklo to become the most promising SMR developer in the U.S. It would have regulatory approval, a respectable customer pipeline, an improved capital position, and its first PPA to validate its commercialization strategy.
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Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.
