Key Points
NuScale is the first U.S. company to secure NRC approval for its small modular reactor design.
Despite this first-mover advantage, the company lacks a first customer for its product.
NuScale is in talks with two potential clients, and a deal in South Korea could be emerging.
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Every company in an emerging industry wants to be the first at something: to get through the regulatory process, into production, or into a customer's hands. For NuScale Power (NYSE: SMR), however, being first has had an unfortunate disadvantage: finding a customer who's willing to be first, too.
It's not hard to imagine why. NuScale is developing a small modular reactor (SMR) that shrinks the benefits of a nuclear power plant -- clean, reliable, always-on power -- but without necessarily shrinking the costs. Indeed, the cost of NuScale's first major project, the Carbon Free Power Plant, had risen to about $9 billion before it was canceled in 2023. Large-scale nuclear power plants can have a similar cost yet produce more electricity.
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Today, NuScale still lacks a firm sale of its SMR technology. And yet its outlook is changing. Data center growth has made reliable power one of the biggest bottlenecks in the build-out of artificial intelligence (AI). A company like NuScale could easily become the linchpin for keeping that boom going.
Image source: Getty Images.
With NuScale trading 20% lower on the year, should you buy before the company inks its first deal or wait this one out?
Closer than most, but still waiting
In simplest terms, NuScale's technology has three advantages: The reactors are scalable (customers can use up to 12 modules based on their needs); they're factory-built, reducing deployment time; and they can supply clean, round-the-clock power.
In theory, then, NuScale could help usher in a new era of clean energy, in which nuclear reactors are smaller and more widely used, powering everything from data centers to hospitals with no greenhouse gas emissions.
To get there, NuScale needs to build its first SMR power plant on time and (more importantly) on a budget. To that effect, it has two critical projects in the works, possibly three. The company recently got the green light to move forward with a planned 462-megawatt electric (MWe) SMR power plant in Romania. It is also partnering with the Tennessee Valley Authority (TVA) through its ENTRA1 Energy partner to deploy up to 6 gigawatts of power across TVA's seven-state service area.
NuScale recently mentioned in its first-quarter earnings that South Korea might be interested in investing in certain U.S. industries, including nuclear power. To be sure, this isn't the same as investing directly in NuScale, nor does it mean it will ink a firm sale of SMR technology. But NuScale and South Korea have long been in talks over developing an SMR power plant. Indeed, since 2019, NuScale and South Korea's Doosan Enerbility have been business partners -- so this could be a sign that the deal is inching closer.
Without a firm sale, however, NuScale's revenue pales in comparison to its costs. The company reported a first-quarter net loss of about $44 million, with revenue of about $565,000. Annual revenue is expected to grow over the next two years, though not nearly enough to make this company profitable.
Data by YCharts
Most investors will probably want to wait until NuScale deploys its first SMR before taking a position. Only very aggressive investors who can stomach the near-term volatility before it does should consider this high-risk, high-reward play on the future of nuclear power.
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Steven Porrello has positions in NuScale Power. 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.
