Introduction:
AI is triggering an arms race among tech giants, with a focus on the planning and construction of large data centers. These data centers require massive power consumption (it is estimated that the energy consumption of a large data center may be equivalent to that of a medium-sized city). Currently, they are surviving through scattered Renewable Energy and old coal-fired power plants.
In the next few years, the large-scale infrastructure construction of data centers will continue, and the demand for electricity will continue to grow at an astonishing rate. So, is there an ultimate solution?
Of course, the answer is nuclear energy.
In this article, the RockFlow investment research team will provide an in-depth analysis of the "end of AI energy" - the most forward-looking sub-field of nuclear energy, and take stock of the investment value of old giants and emerging companies in the nuclear energy concept stocks.
1. Why are tech giants flocking to the nuclear energy track?
In the past few months, tech giants have made a series of announcements related to nuclear energy:
Google collaborates with Kairos Power to develop Small Modularization Nuclear Reactors (SMR). Amazon has reached an agreement with Energy Northwest to fund the development of four small SMRs to meet Amazon's energy needs. Microsoft and Constellation Energy signed a 20-year power purchase agreement, planning to restart the US Three Mile Island nuclear power plant that was closed due to a nuclear accident. Oracle plans to use SMR to power data centers.
In addition, several global private equity giants are considering investing in the nuclear energy sector, including the Carlyle Group, Brookfield Asset Management, and Apollo Global Management.
Almost everyone believes that nuclear energy will almost certainly become an important part of the ultimate energy solution, but some people are concerned that it will not meet the current energy needs of AI fast enough.
In the case of the Three Mile Island nuclear power plant, it is very difficult to restart a dormant nuclear facility, which requires crossing regulatory barriers and addressing the inevitable aging of facilities during shutdowns. It is estimated that it will not be restarted until 2028 at the earliest.
However, although Microsoft's nuclear power plant restart plan takes time, it is at least based on known and verifiable technology. However, the most emerging (and commercially available) technological solution in the nuclear energy field, the Small Modularization Nuclear Reactor (SMR), is not.
Traditional nuclear power plants are expensive and take decades to build. After nuclear leakage accidents such as Chernobyl, Three Mile Island, and Fukushima, the public has been resisting nuclear power plants. However, as a simplified nuclear power production solution, SMR has advantages such as flexibility, lower upfront costs, and modular deployment.
The simplest explanation is that it is a smaller version of traditional nuclear reactors. Modularization design can be achieved in the factory (rather than on-site construction), easy to assemble and control, and guaranteed from quality inspection to more predictable supply chain and construction quality. After assembly, they are transported to the site and stacked together to form the entire nuclear power plant.
Although SMR can only produce 50-300 MW of electricity (traditional nuclear power plants generate 1GW), the convenience of building new facilities will compensate for this deficiency. Many designs adopt overall configurations, with steam generators, turbochargers, and main coolant pumps installed inside the reactor vessel. Modern computational fluid dynamics enables engineers to simulate cooling behavior with unprecedented accuracy, while accident-tolerant fuels and advanced new materials improve safety margins and operational efficiency. Therefore, the complexity of installation and maintenance is greatly reduced, while safety is improved by reducing pipelines and potential leakage points.
Currently, there is only one commercially deployed SMR in the world - Akademik Lomonosov, a floating nuclear power plant in Russia that provides power to remote areas of the Arctic. China is also in the early stages of piloting this technology. In addition, NuScale is the only company in the US whose SMR design has been certified by the Nuclear Regulatory Commission (NRC), but due to a lack of commercial interests, it had to cancel the milestone project several years ago.
According to the International Atomic Energy Agency (IAEA), more than 25 countries are investing in SMR. Well-known energy Data Analysis firm Wood Mackenzie estimates that the global SMR project value will exceed $176 billion in 2024, and by 2050, SMR is expected to account for 30% of the world's nuclear power plants.
And the tech giants are jumping in, which means that providing cheap nuclear energy on a large scale through small facilities is expected to become a reality faster in the coming years.
2. The prospects are good, but SMR also faces multiple obstacles
The most important thing for any nuclear facility is obviously safety, and nuclear power plants are no exception. The core safety task at the beginning of its design is how to keep the core of the nuclear reactor cool if the nuclear power plant suddenly shuts down and stops generating electricity. If the coolant stops circulating, the fuel heat may increase sharply, which may melt and then leak radioactive materials. This situation occurred at the Fukushima nuclear power plant in 2011, when the backup generator responsible for cooling the nuclear power plant was destroyed by a tsunami, ultimately leading to a widespread disaster.
Fortunately, many SMR designs come with passive and self-contained safety systems that do not rely on manual operation or external power sources. Even many SMRs claim that passive cooling does not require external water (they will use more advanced convection methods to cool the reactor).
In addition to being more secure, the main advantages of SMR compared to traditional nuclear power plants include faster construction speed, lower individual costs, and more flexible location (requiring smaller plots of land).
However, there are still many obstacles to the true commercialization of SMR.
The main drawback is that they are much smaller than traditional nuclear power plants, and it is more expensive to produce the same amount of energy than traditional nuclear power plants, making it difficult to generate strong economies of scale. Judging from the few previous landing projects, the early construction of SMR usually faces astonishing cost overruns (budgets will exceed 3-7 times), and the completion time is very long. These problems are repeated in various countries, indicating that there are still systemic problems in cost estimation and construction.
For example, NuScale cancelled its first project in the US due to high costs and lack of customer interest. In contrast, SMR projects in China and Russia have made greater progress (with integrated supply chains, more controlled costs, and guaranteed revenue sources). However, even for them, the cost of building SMR is still much higher than initially estimated.
Fortunately, although the design and construction process of SMR is lengthy, it is still much faster than purchasing (or building) traditional nuclear power plants. Moreover, these small nuclear reactors have high flexibility in location, are relatively reliable and stable, and support uninterrupted operation around the clock.
These are even more important for tech giants and giant data center operators who urgently need energy support and are relatively insensitive to costs (because their software services have higher gross profit margins and can afford higher costs). Therefore, for them, in addition to finalizing a certain amount of clean energy such as solar energy, vigorously supporting SMR should be a necessary path.
3. Who is the next stock with 10x in the nuclear energy industry?
The current nuclear energy industry has gathered a group of emerging companies such as NuScale and Oklo, as well as established and mature companies such as Westinghouse that have been working in the industry for a long time. Even Rolls-Royce, one of the world's three major aviation engine manufacturers (although it is synonymous with luxury cars in the eyes of ordinary people), began developing miniature nuclear reactors in 2021 and worked with the United Kingdom Space Agency to study how to use nuclear energy for space exploration.
In fact, since Microsoft announced a partnership to expand the Three Mile Island nuclear power project a few months ago, and Google and Amazon subsequently announced a nuclear energy partnership, the stock prices of NuScale, Oklo, and others have experienced several rounds of significant increases (and decreases).
NANO, as a representative of miniature nuclear reactor technology, is not only flexible but also has high deployment efficiency, especially suitable for the rapid energy supply needs of energy-scarce areas; Oklo has attracted much attention with the early investment support of OpenAI founder Sam Altman; in addition, NuScale Power, as the leading player in miniature modularization reactor (SMR) technology, has also become a hot cake under the goal of Carbon neutrality due to its scalability and low cost advantages.
Next, the RockFlow investment research team will provide you with an in-depth analysis of several of the most promising US nuclear energy concept stocks.
NuScale Power（SMR）
As a newcomer in the nuclear energy field, NuScale (note: its stock code is also SMR, which is not the same concept as the SMR small Modularization nuclear reactor mentioned earlier) has the most significant advantage that it is currently the only company in the US whose SMR design has been certified by the Nuclear Regulatory Commission (NRC) (the certification was issued in July 2022). Although other companies are striving to obtain regulatory approval in the US, NuScale, with its first-mover advantage, is more likely to use this momentum to maintain its lead in the future.
However, NuScale's biggest problem was the cancellation of their first SMR project (a carbon-free power project approved by regulatory authorities). The project was first launched in 2015, and in the following years, cost estimates continued to rise, from $4.20 billion to a final freeze frame of $9.30 billion. In November 2023, due to insufficient customer interest (not enough utility companies committed to purchasing power), NuScale was forced to terminate the project. This also dealt a huge blow to the stock price at that time.
Fortunately, SMR caught up with the new nuclear power wave in 2024. They have reached an agreement with Standard Power to build a new project aimed at powering the Data Center, which is expected to be put into use and generate revenue in 2029.
From a technical perspective, NuScale's SMR design is indeed better than other energy solutions, as it is cost-competitive, safe, and scalable. NuScale power modules are completely factory-manufactured, do not require on-site construction, and operate using conventional nuclear fuel, which is widely available and has an established regulatory framework. This makes costs more predictable and has lower operating and maintenance costs than traditional nuclear reactors.
RockFlow's research team believes that SMR's technology is relatively mature and it is currently the only company approved to build nuclear reactors in the US. Despite its poor financial situation, the company is expected to continue to rise with the improvement of its financial prospects. With the factory put into use, its financial situation is expected to improve. Although it is still a small company, there is a lot of room for growth.
However, the risk lies in the fact that it will take several years for the project to truly start production and generate revenue, which is an important risk that investors need to consider.
OKLO
As a rising star, OKLO has many reasons to be optimistic.
Firstly, small-scale Modularization reactor technology is not new. There are precedents in the world, which greatly reduces the execution risk of "starting from scratch". The company is launching the construction of its first power plant, and as part of its cooperation with the NRC, OKLO has piloted some new types of license applications, which should simplify the process. In addition, the company plans to sell electricity instead of reactors, which means they face fewer obstacles.
Secondly, in terms of business, OKLO has a large amount of cash and a relatively stable burning rate. Although it has not yet generated meaningful income, its quarterly loss is about 12 million US dollars, and Current Assets exceed 230 million US dollars, so its liquidity situation is relatively considerable.
In addition, although the company's focus has been on the design and planning of core products, sales and development work has also begun, and OKLO has more than 2 GW of potential power purchase agreements, with customers including Equinix, Diamondback Energy, and the Defense Logistics Agency.
Finally, the potential economic benefits of OKLO are very good. Currently, OKLO expects the cost of building a 15MW power plant to be about $70 million. Once a certain scale is achieved, the cost is expected to drop to $60 million. Based on the recent Data center PPA contract price ($100/MWh), the 15MW power plant generates $36,000 in revenue per day, equivalent to $13.10 million in annual revenue, and the highest profit margin is expected to be as high as 60% after stable operation. In addition, once the company's nuclear waste recycling solution is put into use, considerable cash flow can also be obtained from the front-end investment in plant and fuel costs.
RockFlow's research team believes that OKLO has strong appeal in terms of reactor products, future markets, fit, and unit economic benefits. Optimistically, we can expect to see 2-7 power plants put into operation in 2028 and 5-12 power plants put into operation in 2029. For a company that may lead a new era of global energy, the current 3 billion market value is not expensive.
NANO Nuclear(NNE)
NNE is a micro nuclear reactor development company. Since its IPO in May 2024, its stock price has risen sharply, from a low of $3.25 to a recent $23. Although the stock price has risen sevenfold, there is still a long way to go before achieving the monetization of micro nuclear reactors.
Latest news shows that NNE plans to launch monetization micro nuclear reactors Zeus and Odin between 2030 and 2031. The company is simultaneously developing several Lines of Business - fuel manufacturing, fuel transportation, and nuclear consulting services, which will generate some revenue in the short term to assist in the development and licensing of its main business.
According to the previous financial report, the company's micro nuclear reactors Zeus and Odin are mainly aimed at four key markets: mining operations for remote power generation; the shipping industry for ship power; electric vehicle charging infrastructure; and data centers and AI computing facilities. The most sought-after among them is obviously providing micro reactors for data centers and AI computing facilities.
It should be noted that since its establishment in February 2022, the company has accumulated a net loss of $14.94 million without generating any revenue. As of June 30, 2024, its cash and equivalents were $13.80 million. After several rounds of equity stake financing, the cash position increased to $125 million. Currently, cash is still abundant, and considering the relatively small cash consumption of $2.54 million in the previous quarter, they still have a long way to go in the future.
However, with the development of the company's consulting business, nuclear fuel transportation department, new nuclear fuel production facilities, and micro nuclear reactor research and development activities, cash consumption is expected to increase significantly in 2025.
NANO's technology roadmap indicates that the company will enter the demonstration phase and build its nuclear reactor test bed in 2025-2026. Once they can prove the feasibility of micro nuclear reactors (equivalent to the end of the exploration phase), it is expected to gain more market confidence and attract speculative funds to enter the market.
As for the roadmap after that, they expect to start business operations in 2031 because it involves obtaining permission from the Nuclear Regulatory Commission. Currently, this is a relatively optimistic expectation.
BWXT
The RockFlow research team believes that although small-scale Modularization technology may be the future, there are also good low-risk options in the nuclear energy track, such as BWXT.
The company's more precise positioning is actually a defense contractor specializing in building and maintaining nuclear reactors for the US Navy. It also produces nuclear fuel and components for nuclear energy companies in the US and Canada. The business is very predictable, with long-term contracts and safety clearances from the Navy, and abundant free cash flow.
Currently, the reactor technology available for naval vessels is sufficient to build small (20-300MW) or micro reactors (1-20MW); but the key lies in cost and IPO time. According to the company, its expertise and supply chain (including fuel manufacturing) are very strong competitive advantages. However, a potential obstacle may be obtaining safety licenses for military technology for commercial use.
BWXT's commercial business currently accounts for 19% of total revenue and has lower profit margins than its defense business. The company expects to grow by 5% -10% year-on-year next year, thanks to the contract signed with CANDU (Canadian reactor) and several projects for mining, space, shipping, and data center nuclear reactor monetization.
From a valuation perspective, compared to companies like Nuscale, BWXT is very cheap. RockFlow believes that it is a defense Monopoly Enterprise with monetization nuclear energy opportunities. As the company obtains a larger proportion of revenue and cash flow from commercial businesses, its premium over defense companies will gradually become apparent. Although companies like SMR and OKLO claim to have advanced technology, they have not yet been monetized or fully validated. BWXT has mature technology and manufacturing capabilities, making it a good choice.
Of course, it should be pointed out that the main risk facing the company in the future is that for national security reasons, its small or micro nuclear reactor technology may not be monetized. This may limit the company's growth potential, and as a result, related businesses may be subcontracted to multiple companies instead of being built, sold, and maintained as a whole set of new SMRs.
4. Conclusion
The RockFlow research team believes that the energy consumption demand of AI Data Center is growing exponentially. At a time when traditional energy sources are struggling to sustain, the investment value of the nuclear energy track is accelerating.
From Google to Microsoft, tech giants have set their sights on this trillion-dollar market. This is not only a barometer of the energy revolution, but also represents the birth of a new blue ocean for investment. In the technological wave triggered by AI, nuclear energy is redefining the energy landscape, and small modular nuclear reactors (SMRs) have opened up a new era of nuclear energy monetization. From veteran nuclear energy giants to emerging SMR companies, this sector is brewing huge investment opportunities for the next decade.
Author Profile:
The RockFlow research team has a long-term focus on high-quality companies in the US stock market, emerging markets such as Latin America and Southeast Asia, and high potential industries such as encryption and biotechnology. The core members of the team come from top technology companies and financial institutions such as Facebook, Baidu, ByteDance, Huawei, Goldman Sachs, CITIC Securities, etc. Most of them graduated from top universities such as Massachusetts Institute of Technology, University of California, Berkeley, Nanyang Technological Institute, Tsinghua University, and Fudan University.
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