2 Nuclear Stocks Worth Buying After the SpaceX IPO

The SpaceX (NASDAQ: SPCX) IPO is complete. Now, the spending spree begins. What will SpaceX be spending all of its newfound IPO cash on? The answer is obvious if you read through the company's IPO prospectus: artificial intelligence (AI).

"We believe we have identified the largest actionable total addressable market in human history," SpaceX's IPO prospectus boldly claims. The company values its total addressable market at an astounding $28.5 trillion. More than 90% of that total opportunity set, however, deals exclusively with AI. Therefore, SpaceX's long-term growth prospects hinge heavily on how well the company scales its AI division.

There's just one problem: a lack of new energy supply. AI technology relies on data centers to function, infrastructure that is highly energy-intensive. For the AI industry to grow, massive amounts of new energy systems will need to come online. "Energy supply is constrained globally due to the significant increase in demand for, and limited availability of, energy to power AI compute," SpaceX's IPO prospectus points out.

Long term, SpaceX's solution appears to be orbital data centers. That is, data centers placed in orbit around the Earth, harnessing the sun's energy to operate. But many industry experts are skeptical as to when -- or even if -- orbital data centers will ever be successfully commercialized.

In the meantime, AI companies like SpaceX will need to rely on terrestrial power sources to fuel their data center build-outs. Traditional renewable energy sources like wind and solar will surely play a part in the energy mix. But there's also a novel form of nuclear energy that could spark mounting interest from major AI players.

These 2 nuclear energy stocks could help SpaceX and other AI companies grow

Big tech firms are already showing renewed interest in nuclear energy as a way to provide large amounts of reliable baseload power while limiting additional carbon emissions. Alphabet, the parent company of Google, for example, is directly involved in the construction and rehabilitation of several nuclear energy sites.

The issue with conventional nuclear power plants (NPPs), however, is that they take too long to build. Often, these larger systems can take a decade or more until power is actually produced and delivered. That's where SMRs -- small modular reactors -- come into play.

"When compared to traditional, large-scale NPPs, SMRs require less land, shorter construction periods, and have enhanced safety features," stresses a recent report from Bank of America. "In the context of energy demand, advancements in technology like SMRs could likely reshape nuclear power supply chains over the next decade, given the major benefits over conventional powerplants."

Image source: Getty Images.

There are a variety of companies globally pursuing the development and commercialization of SMR systems. Many of the companies are private. Others are diversified industrial conglomerates, making it difficult for investors to bet specifically on the scaling of SMR technology worldwide.

There are, however, two pure-play SMR stocks that every AI and nuclear energy investor should add to their watchlists: NuScale Power (NYSE: SMR) and Oklo (NYSE: OKLO).

These two companies are taking slightly different approaches to SMRs. NuScale is mostly focused on partnering with electric utilities for grid-scale deployments. Oklo, meanwhile, is focused more on selling directly to data center operators. That's not a surprising approach, given that one of Oklo's early investors was Sam Altman, the CEO of OpenAI, the company that developed ChatGPT.

To be sure, neither NuScale nor Oklo has actually ever commercialized one of their SMR systems. Both companies have an impressive pipeline of customers. But whether those deals will ever move from theory to reality remains to be seen. And while SMRs have cost benefits on paper, we still don't know whether AI companies like Alphabet or SpaceX will ever be willing to go all in on the relatively unproven technology.

"The economics of SMRs are a bit complex," warn Bank of America analysts, continuing:

Proponents highlight potential cost and construction advantages (modular design); however, critics point to current cost unpredictability. SMRs often face cost overruns and delays in demonstration projects, raising concerns about their economic viability. This challenge is underscored by the fact that renewable energy technologies, like solar and wind, are becoming increasingly cost-competitive, potentially making SMRs less attractive economically.

Investing in SMR stocks like NuScale and Oklo should be reserved for long-term investors only. An appetite for greater risk in exchange for higher potential returns is also a must for SMR investors.

Bank of America is an advertising partner of Motley Fool Money. Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.