Better buy: Oklo (OKLO) vs. NuScale Power (SMR) #4
In response to the remarkable engagement generated by our previous equity report on Oklo, I'm excited to bring you this special edition analysis - outside of our usual biweekly schedule.
Introduction
In the upcoming analysis, we’ll delve into a comparison of two frontrunners in the small modular reactor (SMR) energy sector - Oklo (NYSE: OKLO) and NuScale Power (NYSE: SMR).
With the global drive for clean, reliable baseload power escalating, SMRs have emerged as a pivotal technology in advancing sustainable energy goals, especially in sectors like AI and data centers where energy demands are high.
Our analysis will explore critical differences in technology readiness, business models and strategic positioning of Oklo and NuScale. We’ll discuss how recent macroeconomic shifts, regulatory incentives and technological innovations are propelling nuclear energy into the spotlight, aiming to satisfy the demand for low-carbon energy. Join us as we unpack which of these companies stands out as the more promising investment in this transformative industry.
Executive Summary
Key Highlights:
■ Better buy: Oklo (OKLO) vs. NuScale Power (SMR)
We're taking a look at Oklo, Inc. (NYSE: OKLO) and NuScale Power (NYSE: SMR) to figure out which company might be a better investment. Both are part of the growing small modular reactor (SMR) industry, aiming to provide clean and reliable energy. They're targeting the high demand for sustainable, always-on power, especially in areas like artificial intelligence (AI) and data centers. However, they differ in how ready their technology is and how they run their businesses.
■ Macro trends in the energy industry supporting nuclear growth
Reports from McKinsey and Goldman Sachs say nuclear energy is key for a low-carbon future. It's extremely reliable, doesn't emit greenhouse gases and can be expanded using technologies like SMRs. Nuclear power could supply up to 80% of the world's energy by 2050 if we hit our net-zero goals. Plus, the Inflation Reduction Act (IRA) has made nuclear energy way cheaper - costs have dropped by 75% thanks to incentives - making it more competitive than natural gas. Unlike gas, which has emissions and price ups and downs, nuclear offers steady and sustainable power. Innovations like Oklo's fuel recycling also boost energy security and keep costs stable.
■ Conclusions: preferred buy: Oklo (OKLO)
So, why do we prefer Oklo? They're tapping into the high-growth tech sector by focusing on data centers and AI companies, which could lead to faster growth compared to NuScale's more traditional utility approach. Sure, Oklo hasn't made revenue yet and has some regulatory hurdles to clear, but their unique recycling-based SMR technology might give them a big cost advantage in the long run. With the expected boom in demand for clean and powerful energy in the AI world, Oklo has a lot of potential upside if things go as planned.
1) Macro trends in the Energy Industry Supporting Nuclear Growth
First, let’s understand why for the future, nuclear energy is the only game in town. Recent reports from McKinsey and Goldman Sachs outline critical macroeconomic and regulatory shifts emphasizing nuclear energy's role in a low-carbon future, particularly for advanced technologies such as small modular reactors (SMRs).
Transition to low-carbon energy sources:
As global commitments to net-zero carbon emissions increase, the demand for reliable, low-emission baseload power sources has surged. Nuclear energy, with its high capacity factor and low lifecycle emissions, is now seen as essential in complementing renewable sources. McKinsey's Global Energy Perspective 2024 forecasts that by 2050, low-carbon sources like nuclear could make up 80% of global power generation under aggressive decarbonization scenarios. Goldman Sachs' Carbonomics report highlights that the U.S. Inflation Reduction Act (IRA) could reduce the carbon abatement cost curve by 75% through extensive tax credits and subsidies, driving the economics of clean energy, including nuclear, which is recognized for its stability and ability to support a renewable-powered grid.Technological innovations in nuclear energy:
Advanced nuclear technologies, especially SMRs, are becoming central to future energy plans due to their modular design, lower costs and enhanced safety profiles. McKinsey's data indicate that SMRs are expected to comprise up to 25% of new nuclear installations by 2040, largely because of their adaptability and operational flexibility in diverse environments. Goldman Sachs echoes this trend, noting that the IRA’s robust incentives for advanced nuclear and renewable technologies will drive a transformative $3 trillion investment across U.S. energy infrastructure by 2032. This investment supports scaling technologies that were previously cost-prohibitive, such as hydrogen and carbon capture, in parallel with nuclear advancements.Resiliency and energy security:
Nuclear energy is increasingly favored for energy security amid geopolitical risks and fossil fuel price volatility. According to Goldman Sachs’ Carbonomics framework, the IRA provides the most supportive U.S. regulatory backdrop in clean energy history, covering up to 50-80% of nuclear project costs through tax incentives and production credits. McKinsey also underscores the role of nuclear in stabilizing grids reliant on renewables, especially as the IRA facilitates rapid clean energy deployments in high-demand sectors, such as data centers and tech, which Oklo targets with its unique fuel-recycling technology.
Together, these macroeconomic and policy-driven factors underscore nuclear energy’s growing role in the energy transition, with Oklo positioned to capitalize on both technological advancements and the increasing demand for sustainable, stable power.
Why nuclear is better than natural gas:
Nuclear energy offers a superior alternative to natural gas for achieving a low-carbon, resilient energy future due to its consistent emissions profile, energy stability and cost predictability. According to McKinsey’s Global Energy Perspective 2024, nuclear energy is essential for reaching net-zero goals, as it produces zero carbon emissions during operation and offers a steady baseload power that complements intermittent renewables like solar and wind. In contrast, natural gas, while cleaner than coal, still contributes substantial carbon emissions, complicating decarbonization pathways that depend heavily on achieving net-zero targets by mid-century.
Goldman Sachs’ Carbonomics framework further underscores that nuclear energy is economically competitive under the current regulatory environment, especially with the U.S. Inflation Reduction Act (IRA) driving extensive tax credits and incentives. These incentives have cut nuclear energy’s cost of production, making it increasingly cost-competitive with natural gas, whose prices are prone to geopolitical volatility. In addition, natural gas systems rely heavily on global supply chains that can be vulnerable to disruptions, whereas nuclear energy can offer more localized, controlled fuel cycles, particularly with innovations like Oklo’s fuel recycling approach, which reduces fuel waste and enhances resource independence.
In essence, nuclear energy surpasses natural gas by offering a more sustainable, stable and economically feasible pathway to a low-carbon future, particularly in sectors and regions with strong demands for energy security and long-term price stability.
2) Comparative analysis
1. Company overview and market position
Oklo: Founded with a focus on advanced nuclear technology, Oklo's small modular reactors (SMRs) utilize a unique fuel recycling system to extend fuel usage and address nuclear waste. With significant backing from notable tech leaders, Oklo has strategic agreements for future reactor deployment with partners like Equinix and Wyoming Hyperscale. Although it has yet to achieve revenue, Oklo’s positioning aligns strongly with the burgeoning demand for sustainable energy solutions in AI and high-energy tech sectors. Oklo's first reactor is expected to go live by 2027.
NuScale: NuScale, on the other hand, is more advanced in its regulatory and deployment status. Its light-water SMR technology, approved by the U.S. Nuclear Regulatory Commission (NRC), is expected to go live in Utah by 2029 under a utility consortium. This positions NuScale as the first U.S. company with a fully licensed SMR. The company’s business model primarily targets utility companies, offering reactors as scalable, grid-supportive power sources rather than direct-to-customer power sales like Oklo.
2. Financial overview and capital structure
Oklo: Oklo, currently in a pre-revenue stage, recorded a net loss of $53.3 million in the first half of 2024. This loss includes expenses related to its SPAC merger and business scaling. The company has a relatively well-capitalized balance sheet from its SPAC merger but still faces potential funding rounds to finance its reactor developments. Oklo’s planned cost-saving approach through fuel recycling could be significant long-term if executed as planned.
NuScale: With a more mature operational structure, NuScale has established revenue from early contracts and licensing. However, its profitability is contingent on securing additional contracts and scaling its production to reach revenue targets by the early 2030s. NuScale has a leaner loss margin than Oklo due to its operational contracts and partnerships. Yet, its capital needs to remain substantial, as construction costs for SMRs are high and further capital infusions may be necessary.
3. Technological advantage and differentiation
Oklo: The company's technological edge is centered on advanced fission that recycles nuclear waste, reducing long-term waste and fuel costs by up to 80%. This model allows it to uniquely leverage the vast stockpile of existing nuclear waste and provides a low-cost fuel alternative, a competitive advantage in an industry often hampered by high operating costs. However, Oklo’s technology, still in the early demonstration phase, faces high regulatory and technological execution risks.
NuScale: NuScale’s light-water reactors follow a more traditional and heavily tested nuclear model. With NRC approval already in place, NuScale benefits from a substantially lower regulatory risk, offering a faster path to market. NuScale’s standardized, factory-produced SMR design reduces some operational risks but does not provide the recycling advantage Oklo pursues.
4. Market demand and growth potential
Oklo: The demand for clean energy from AI and high-tech firms offers Oklo a lucrative market niche. With long-term power purchase agreements (PPAs) directly targeted at data centers and tech companies, Oklo’s market strategy may benefit from the high growth rates in AI and computing power demand. If it overcomes regulatory and operational hurdles, Oklo’s potential for rapid revenue growth is strong, albeit delayed until initial reactor deployment in 2027.
NuScale: NuScale’s strategy aligns with traditional utility needs, focusing on replacing coal plants and augmenting grid stability. NuScale’s target market is stable but limited in growth potential compared to Oklo’s tech-driven demand.
5. Valuation metrics and price targets
Oklo:
Current price: ~$20
1-Year target price: $35, dependent on additional PPA contracts and regulatory milestones.
5-Year target price: $75–$100, assuming successful initial deployments, steady PPA growth and scaling of fuel recycling facilities.
NuScale:
Current price: ~$11
1-Year target price: $15, contingent on additional utility contracts and further regulatory progress.
5-Year target price: $25–$30, dependent on successful rollout and adoption by utility partners across multiple regions.
3) Recommendation
Preferred buy: Oklo (OKLO)
Rationale: Oklo’s positioning within the high-growth tech sector, particularly targeting data centers and AI firms, presents a more dynamic growth trajectory than NuScale’s traditional utility-focused model. While Oklo’s pre-revenue status and regulatory risks are considerable, its unique recycling-based SMR technology offers a compelling long-term cost advantage. The projected demand for clean, high-density power in the AI sector offers Oklo a high upside potential if execution proceeds as planned.
While NuScale presents a more immediate but moderate growth option, Oklo’s unique market approach, aligned with AI sector growth, positions it as a potentially higher-yield investment. However, investors should be prepared for the volatility inherent in early-stage nuclear innovation.
Achievable through successful partnerships, regulatory progress and continued demand growth in AI and tech sectors, with institutional investor backing as an additional catalyst.
4) Oklo’s 1-year target price ($35) explained:
a) Qualitative side: successful partnerships, regulatory progress and AI demand
Strategic partnerships and initial revenue expectations:
Oklo has already secured significant preliminary agreements, such as its 500 MW deal with Equinix and partnerships with data center firms like Wyoming Hyperscale. These partnerships set a foundation for power purchase agreements (PPAs) that are expected to convert into recurring revenue streams. Given the elevated demand for low-carbon energy in data-intensive industries, these agreements could significantly boost Oklo’s revenue as early as 2027 when the first reactors go live.Increased demand for low-carbon, high-density energy:
The AI and tech sectors are shifting towards clean, uninterrupted energy solutions to sustain high-power workloads, providing Oklo with a rapidly growing customer base. With tech companies like Google moving towards nuclear options, Oklo is positioned at the forefront of this trend. Analysts forecast that demand for nuclear power in data centers alone could grow 10–15% annually, which strongly supports Oklo’s market capture in this sector.Progress in regulatory approvals:
Oklo’s timeline to bring its first reactor online by 2027 hinges on regulatory progress, a primary driver of short-term valuation. Oklo’s Combined License Approval from the Nuclear Regulatory Commission (NRC) is expected by 2025. If achieved on schedule, this milestone would significantly reduce operational risks and boost investor confidence, increasing the probability of achieving its $35 target within one year.Cost-efficiencies through fuel recycling:
Oklo’s ability to recycle spent nuclear waste is a differentiating factor that could cut fuel costs by up to 80% compared to traditional nuclear plants. This innovation is likely to be well-received by environmentally conscious clients in the tech industry, giving Oklo both a technological and cost advantage that underpins near-term stock valuation. If the company can demonstrate successful recycling at scale, it will gain a competitive edge that could push shares closer to the $35 target as market enthusiasm grows.Institutional investor interest:
Institutional support, especially from ESG-focused funds, could push Oklo's stock higher in the short term. Notable figures, including investors like Sam Altman, bring credibility and attention, which could drive additional institutional buy-in. Any substantial institutional backing or analyst coverage could drive price momentum towards $35 in the next 12 months.
b) Quantitative analysis: expected valuation multiples and comparables
PPA-driven revenue projection:
Oklo’s target price reflects expected revenue from initial PPAs, assuming an estimated 10–15% revenue growth per year leading up to its first commercial reactor deployment in 2027. Based on expected 2027 revenue, the $35 price reflects a 15x EV/revenue multiple for a company on the verge of commercial revenue but with remaining regulatory risks. For a detailed PPA analysis and price target implication for Oklo, please look in the appendix for our calculation and estimates.
5-Year target price for Oklo ($75–$100)
Revenue growth from expanded PPA portfolio:
With Oklo’s reactors expected to be operational by 2027, revenue from multi-year PPAs could begin materializing by 2027-2028, driving significant revenue growth. Based on projected deployment rates and the average market PPA pricing, Oklo could feasibly reach annual revenues of $500 million to $700 million by 2030. Assuming Oklo achieves a 20–25% EBITDA margin, this revenue could yield a steady cash flow that justifies a valuation in the $75–$100 range, applying a forward EV/EBITDA multiple of 15x.Enhanced cost efficiency from modular reactors and recycling:
Oklo’s modular reactor approach minimizes site construction costs and time. Combined with its fuel recycling innovation, this efficiency could result in long-term operating costs 30–40% lower than traditional nuclear plants. These cost savings would improve Oklo’s profitability over the long run, a crucial factor in achieving the $75–$100 price target, as lower production costs would lead to higher EBITDA margins and, consequently, a more favorable market valuation.Competitive moat through proprietary technology:
The proprietary nature of Oklo’s fuel recycling technology and its focus on clean, AI-targeted energy gives it a durable competitive advantage. By recycling waste into usable fuel, Oklo could attract clients who prioritize sustainability, particularly as more companies adopt ESG-driven goals. If Oklo can successfully deploy its reactors at scale, it would be well-positioned to capture market share not only in data centers but potentially in industries with large power demands like manufacturing and heavy industry. Achieving this would position Oklo among market leaders in nuclear energy, supporting its valuation towards $75–$100.Regulatory tailwinds and government subsidies:
Oklo stands to benefit from the favorable regulatory environment for clean energy, including potential subsidies and tax credits. The Inflation Reduction Act (IRA) and other clean energy incentives provide financial support that could significantly lower Oklo's operational and development costs. Continued government support over the next 5 years could enhance Oklo’s return on equity, improving its cash flows and supporting the higher valuation range.Scalability and expansion opportunities:
If Oklo’s initial reactor deployments succeed, it can expand its operations across various states, potentially securing contracts with energy-hungry regions in the U.S. and globally. This scalability could lead to exponential growth as Oklo increases its deployment footprint, similar to the expansion strategies seen in other renewable energy sectors like solar and wind. The scalable nature of its modular reactors would allow Oklo to adapt to customer demand efficiently, reinforcing its position in the market and supporting the higher-end $100 valuation by 2029-2030.
Summary of price target justification
1-Year Target ($35): Achievable through successful partnerships, regulatory progress and continued demand growth in AI and tech sectors, with institutional investor backing as an additional catalyst.
5-Year Target ($75–$100): Predicated on substantial revenue from PPAs, cost savings from proprietary technology, market expansion and regulatory tailwinds.
These targets align with both Oklo's operational milestones and the long-term market trends for nuclear energy solutions in high-demand, environmentally focused sectors. Investors can approach Oklo as a high-potential growth stock with defined entry and exit strategies based on the company's progress in regulatory, operational and market developments.
5) Appendix
Detailed analysis of Oklo’s PPA-driven revenue projection, structured around its current agreements, estimated deployment capacity and anticipated revenue per megawatt:
1. Existing PPA agreements and capacity commitments
Current PPAs: Oklo has a prominent 500 MW agreement with Equinix and additional contracts in progress, such as the 100 MW Wyoming Hyperscale deal. These commitments position Oklo to begin earning substantial revenue as its reactors go online, starting in 2027.
Deployment goals: Oklo’s first reactors are targeted to be operational by 2027, with plans to deploy up to 500 MW initially, expanding towards 1 GW as more contracts are signed and reactor deployments increase.
2. Revenue per megawatt estimate
The revenue per megawatt can be estimated based on standard PPA rates in the nuclear industry for long-term contracts. Given the premium that advanced nuclear energy commands, particularly for its stability and environmental benefits, we’ll use a conservative estimate of $90 to $110 per megawatt-hour (MWh).
Assumptions for revenue calculation
PPA rate: We’ll use an average PPA rate of $100 per MWh.
Capacity factor: Advanced reactors like Oklo’s are expected to operate at a 90% capacity factor.
Annual generation (MWh per MW): 365 days×24 hours/day×0.90 (capacity factor)=7,884 MWh per MW annually
Annual revenue per megawatt
Using these inputs, Oklo’s annual revenue per megawatt becomes:
7,884 MWh per MW×$100 per MWh=$788,400 per MW annually
3. Projected revenue from total capacity
Initial 500 MW capacity
If Oklo’s 500 MW deployment with Equinix reaches full capacity, annual revenue from this contract would approximate:
500 MW×788,400 USD per MW=394.2 million USD annually
Expansion to 1 GW by 2030
Should Oklo expand to 1 GW, potentially through additional agreements with tech companies or industrial clients, annual revenue would double:
1,000 MW×788,400 USD per MW=788.4 million USD annually
4. Revenue growth timeline
2027 (500 MW): Oklo’s first commercial reactor deployment could generate an estimated $394.2 million in annual revenue, provided that initial capacity reaches 500 MW.
2028–2030 (800 MW to 1 GW): Assuming Oklo’s deployment capacity expands through new contracts, revenue could grow to $600 million by 2028 and reach approximately $788 million by 2030.
5. Price target implications
This PPA-driven revenue forecast aligns with Oklo’s $35 one-year and $75–$100 five-year price targets, based on revenue multiples common in growth-oriented clean energy companies. Here’s how these projections translate into Oklo’s target prices:
1-Year target of $35:
This target assumes that Oklo’s initial reactors stay on track for regulatory approval and that early revenue visibility from PPAs continues to strengthen investor sentiment.
Based on expected 2027 revenue, the $35 price reflects a 15x EV/revenue multiple for a company on the verge of commercial revenue but with remaining regulatory risks.
5-Year target of $75–$100:
For the longer-term target, revenue growth to $600–$788 million by 2030 justifies an expansion in valuation as Oklo scales. Applying a forward EV/revenue multiple of 15–20x, common among growth stocks in the clean energy sector, yields the $75–$100 range, supported by the company’s execution of its high-revenue contracts and stable cash flows.
These revenue-driven milestones solidify Oklo’s valuation potential and target prices, reflecting its path to commercial viability and robust revenue streams from tech-forward energy solutions.
6) References:
1. Source: Oklo Investor Relations. Available at: Oklo.com
2. Source: NuScale Power Investor Relations. Available at: NuScalePower.com
3. McKinsey & Company:
o Global Energy Perspective 2024
o Nuclear Power and Climate Change Challenge
4. Goldman Sachs
o Carbonomics: Updated cost curve shows diverging trends between power and transport.
o Carbonomics: The Third American Energy Revolution.
Prepared by AI Monaco
AI Monaco is a leading-edge research firm that specializes in utilizing AI-powered analytics and data-driven insights to provide clients with exceptional market intelligence. We focus on offering deep dives into key sectors like AI technologies, data analytics and innovative tech industries.