Energy demand is set to explode over the next decade, with artificial intelligence leading the way. According to Goldman Sachs, data center power demand is expected to grow 15% annually through 2030.
To meet the growing power demand, companies like NuScale Power (NYSE: SMR) are developing creative solutions to bring clean energy to market at a cheaper price. NuScale Power is developing technology for nuclear power generation through its small modular reactor, which has the potential for scalable, more affordable nuclear power generation.
This exciting technology could provide nuclear power for remote locations or industrial applications, making NuScale Power an intriguing investing opportunity. However, the company is still early in its growth phase, and you'll want to consider the following before buying NuScale Power.
NuScale's technology aims to deliver cost-effective, scalable nuclear power
The NuScale Power Module is NuScale's small modular reactor (SMR) that can provide cost-effective, scalable nuclear power of up to 77 megawatts of electricity (MWe). Its scalable plant design can accommodate up to 12 modules, giving it an output of up to 924 MWe.
NuScale has been developing this technology since 2007 and has invested $1.8 billion. The company is the only one to receive a Standard Design Approval from the Nuclear Regulatory Commission for its 50 MWe modular reactors.
What makes this technology exciting is that it could be placed in remote, off-grid small communities while providing carbon-free energy. The small modular reactor could be used for other industrial purposes, such as powering data centers, where energy consumption is expected to go from 3% of U.S. power demand to 8% by 2030.
The company has seen interest in its technology. Last year, Standard Power announced plans to develop two SMR-powered facilities in Ohio and Pennsylvania that will produce 2 gigawatts of clean energy to power nearby data centers.
Diving into NuScale's financial position
However, it's not all smooth sailing for NuScale Power. In November last year, Utah Associated Municipal Power Systems terminated its contract with NuScale for its Carbon Free Power Project. This was expected to be the first operational SMR reactor, and NuScale had to take a $50 million charge due to the contract termination. The company's revenue took a hit due to the canceled contract, and in the first quarter, it reduced its workforce by 28%.
It is also a money-losing operation. Over the last several years, NuScale has lost money as it invests heavily in research and development, and it's still very early in developing a commercial product. While getting customers like Standard Power to sign on is exciting, they remain potential customers, and commercial operations are still a ways off.
SMR Revenue (Quarterly) data by YCharts.
The company also touts its Standard Design Approval from the Nuclear Regulatory Commission, but still has hurdles to overcome. That's because approval was given for its 50 MWe reactor, but its 77 MWe reactor has yet to be approved. The company expects this to be approved by July 2025.
Management estimates its cash burn rate at around $20 million per quarter. Currently, the company has $132 million in cash and equivalents on hand, or a little over six quarters' worth.
In June, the Department of Energy issued a notice of intent for $900 million to fund SMR technologies, which could reduce NuScale's need to raise capital. However, NuScale continues to burn money, and if its design approval or commercial operations take longer to scale up, it could be forced to raise capital, which could dilute current shareholders.
SMR Cash and Equivalents (Quarterly) data by YCharts.
Is NuScale Power a buy?
NuScale Power's technology offers exciting potential and could benefit from growing energy demand over the next several years. Its modular design suits small communities, data centers, or other industrial customers, making it an intriguing investment for very aggressive investors looking to make a bet on the future of clean energy.
However, investing in NuScale is not ideal for most investors. If your investment horizon is shorter (less than five years) or if you take a conservative approach and want to invest in more established, profitable enterprises, NuScale may not be for you. It will take time for its design to be approved, and commercial operations are still some time away, making NuScale's path to profitability highly unpredictable.
Should you invest $1,000 in NuScale Power right now?
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Courtney Carlsen has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
