Investors are increasingly viewing nuclear energy as a burgeoning opportunity akin to the artificial intelligence boom. Oklo (OKLO, Financial), supported by OpenAI CEO Sam Altman, has seen its stock surge nearly 140% over the past month. Oklo is focusing on developing small modular nuclear reactors (SMRs), which aim to produce energy that is cheaper, faster, and more environmentally friendly than traditional nuclear facilities.
Recently, major tech companies like Amazon (AMZN) and Google (GOOGL) announced significant investments in SMR projects. The goal is to balance their climate objectives with the rising energy demands of data centers powered by AI. Oracle (ORCL) CEO Larry Ellison also revealed plans to establish a data center powered by SMRs.
Analyst Eric Stine from Craig-Hallum noted that nuclear energy is undergoing a revival, increasingly being seen as a solution to rising base-load power demands and decarbonization needs. Google's and Amazon's investments mark the beginning of a long-term trend. According to Goldman Sachs, driven by AI demand, global data center power consumption is expected to grow by 160% by 2030. Independent data from the International Atomic Energy Agency indicates North America's nuclear power output could double by 2050.
Following the investment announcements from Google and Amazon, companies with similar technologies to Oklo, such as NuScale (SMR) and NANO Nuclear Energy (NNE), also experienced stock surges, though gains have tapered off this week.
Oklo CEO Jacob DeWitte expressed optimism about the market's potential, emphasizing significant opportunities for success. Research cited by Citi analysts suggests the SMR market could grow to $300 billion by 2040.
In May, Oklo went public through a merger with AltC Acquisition Corp., co-founded by Sam Altman. Other notable investors include Cathie Wood and Peter Thiel. According to a June regulatory filing, Altman holds a 2.6% stake in Oklo. DeWitte stated that the growing energy demands of AI have benefitted the company, with AI-related orders constituting a large portion of their business, including clients from the chip industry and data centers.
However, Wall Street analysts caution that Oklo and its competitors face regulatory and supply chain challenges before they can produce the power needed for AI data centers. Nuclear projects are subject to strict regulations due to past nuclear incidents. Approval from the U.S. Nuclear Regulatory Commission for constructing nuclear power plants averages 80 months and 54 months in the UK.
Many companies, including TerraPower founded by Bill Gates (Trades, Portfolio), are developing small reactors, but none have been deployed in the United States, hindered by lengthy licensing processes.
Fuel supply is another concern for companies like Oklo, NuScale, and TerraPower, as they require a specific type of uranium, HALEU, primarily imported from Russia. Western nations have restricted the development of a high-enrichment uranium supply chain due to nuclear proliferation concerns.
Canaccord Genuity analyst George Gianarikas highlighted the lack of a developed HALEU supply chain in Western countries, which complicates matters for nuclear energy development. Due to limited supply and lengthy licensing, Citi analyst Vikram Bagri recently lowered the price target for Oklo from $11 to $10, citing uncertainties and delayed timelines for new technology and facilities.
Despite these challenges, Seaport analyst Jeffrey Campbell believes Oklo has an advantage in a growing market, emphasizing its ability to use much cheaper regenerated fuel. While traditional nuclear plant construction can cost billions, Oklo claims its SMR deployment costs only a few hundred million dollars.
DeWitte remains optimistic about the future, highlighting bipartisan support for reducing regulatory barriers and increasing domestic uranium supply. Oklo aims to own and operate its facilities, selling energy directly to clients rather than licensing its technology to utilities, potentially speeding up reactor deployment. DeWitte envisions a diverse ecosystem where different clients have varying needs, resulting in multiple successful players in the market.
