Shares of NuScale Power (NYSE: SMR) have been on a roller coaster ride over the past three years. They have risen as high as 575% over the period, but are currently only up around 5%, thanks to an 80% drawdown from their highs. That, however, could make them worth buying for long-term investors. Here's the big reason why you might want to step aboard.
Right now, NuScale Power bleeds red ink, and a lot of it. That's not unexpected, given that it is a start-up introducing new nuclear power technology to the world. That technology is small modular nuclear reactors (SMRs). NuScale Power has key regulatory approvals and is working with several potential partners as it seeks its first sale. The problem is that it doesn't actually have that sale in the books, and until it does, the company's technology remains untested.
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SMRs could be a game changer for the nuclear power industry. They are factory-built, use the most modern safety protocols, and are small enough to be moved easily and placed relatively close to where they are needed. An easy win would be using an SMR to power an artificial intelligence data center. But that's not the only opportunity, since NuScale's SMRs can be linked together to create a utility-scale facility.
The big reason to buy NuScale Power is that you believe SMRs will be a big market in the future. However, the company's future remains highly uncertain until it has actually sold one of its SMRs, built it, and seen it tested in a real-world environment. This is not a stock for the faint of heart.
That said, NuScale has two potential opportunities. A Romanian power company has approved the construction of a nuclear power facility that will use six NuScale Power SMRs. But the financing for that project hasn't been finalized, so the deal is still in limbo. NuScale is also working with ENTRA1 Energy and the Tennessee Valley Authority on the use of SMRs in the United States. But this relationship is still in its early stages, and no SMR has been sold yet. If either one of these opportunities pans out, the story changes dramatically for the better.
Even after the first sale, NuScale Power is likely to continue to bleed red ink for a while longer, even if Wall Street rewards it with a higher stock price. That's because the company still needs to build the first reactor and prove it can operate as expected. So the first sale isn't the end of the road; it is really just the start of the trip. However, if you believe in the promise of SMRs, NuScale Power could be an attractive investment now that it has pulled back so much from its highs. Just go in recognizing the risks and the likely long-term nature of the investment you'll be making.
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