The AI industry is in desperate need of more energy — quickly.
“Tech companies in the AI race need power, and lots of it,” warns The Wall Street Journal. “They aren’t waiting around for the archaic U.S. power grid to catch up.”
Nuclear energy can help meet the power needs of AI companies over the long term. Nuclear energy provides a large amount of reliable baseload power with minimal carbon emissions. The problem is that nuclear power plants can take a decade or more to build, with some projects requiring more than $1 billion in capital to complete.
The AI industry needs more energy faster than what conventional nuclear power plants can deliver. That’s where SMRs come in. These miniature nuclear power plants can be built in a fraction of the time, potentially just two or three years.
Up-front costs are much lower, though all-in operating costs may be higher on a per-megawatt basis than conventionally sized facilities. SMRs can also be expanded over time, with a small-enough footprint to be located directly next to data center infrastructure.
Two pure-play SMR stocks are NuScale Power (SMR -0.51%) and Oklo (OKLO +3.59%). The market cap gap between the two companies is massive. NuScale trades at a $4 billion valuation, while Oklo is valued at nearly $40 billion.
Why the gap, and which SMR stock should investors prefer? The answers to these questions are surprisingly simple.
Today’s Change
(3.59%) $1.43
Current Price
$41.27
Key Data Points
Market Cap
Day’s Range
$39.50 – $41.32
52wk Range
$36.61 – $193.84
Volume
8.1M
Avg Vol
9.7M
Gross Margin
-2347.11%
This is why Oklo trades at a premium to NuScale Power
Both NuScale and Oklo are pursuing SMR developments. NuScale has been approved by regulators to build a system in the U.S., but Oklo has not. In fact, Oklo’s application was denied in 2022. The company took until 2025 to resubmit its application.
Oklo was also on a list of approved suppliers during a recent U.S. military request for SMR systems. Five companies were ultimately selected. Oklo was not one of them.
From this perspective, it may seem strange that Oklo trades at a 900% premium to NuScale Power. Digging deeper, however, Oklo’s strengths begin to emerge.
Both NuScale and Oklo have impressive customer pipelines. NuScale’s project pipeline sits between 6 and 8 gigawatts. Oklo’s pipeline, meanwhile, totals roughly 18 gigawatts. Note also that NuScale’s customer pipeline is largely composed of a single customer, whereas Oklo has at least six sizable customers, greatly reducing the risk of a single project’s failure.
Image source: Getty Images.
Why has Oklo outcompeted NuScale for customers despite not yet having regulatory approval to build an SMR system? The answer likely lies in Oklo’s investor base and its go-to-market strategy.
Sam Altman, CEO of OpenAI, was an early investor in Oklo. He served as the company’s chairman for many years. Having the leader of one of the world’s largest AI companies directly invested in Oklo’s future provides strong social validation.
“I’m all-in on energy. I think there’s urgent demand for tons and tons of cheap, safe, clean energy at scale,” Altman told CNBC as Oklo prepared to go public in 2023. “I don’t see a way for us to get there without nuclear.”
Whereas NuScale is focused on grid-scale deployments, Oklo has pursued deals directly with data center companies. Earlier this year, for example, it agreed to a 1.2-gigawatt deal with Meta Platforms.
Do Oklo’s social validation and direct-sales strategy warrant a 900% premium? Right now, NuScale stock seems to offer more upside potential, given its relatively diminutive valuation.
Valuation aside, Oklo looks better positioned to succeed long term. If deep-pocketed data center companies are driving the surge in energy demand, marketing directly to these businesses through a powerful industry influencer seems like a winning strategy.
