NuScale Power Is Down 84% From Its 52-Week High. Is It Finally Time to Buy the Dip in the Nuclear Start-Up?

Increasing power demands and the reliability of nuclear energy position it as a leading energy source, particularly amid the rapid expansion of artificial intelligence (AI)-focused data centers. With support from the U.S., the development of advanced nuclear reactors is advancing quickly and could kick-start a nuclear energy renaissance.

NuScale Power (NYSE: SMR) is the only company with a standard design approval from the Nuclear Regulatory Commission for its small modular reactor (SMR). However, with the stock down 84% from its 52-week high price of $57.42 per share, is it a buy? Let's dive into the company, what's weighing on it, and what's next for the nuclear energy stock.

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Hyperscalers are turning to nuclear power

Investor enthusiasm for nuclear energy and uranium mining stocks was high last year as nuclear energy returned to favor. At COP28, several countries pledged to triple nuclear energy capacity by 2050.

In addition, nuclear energy is becoming a preferred solution for rapidly expanding AI data centers that require reliable, carbon-free baseload power. In recent years, Microsoft, Meta Platforms, and Alphabet have all inked deals to use existing nuclear power along with nuclear power from next-generation reactors.

NuScale has a first-mover advantage, but there's a catch

NuScale Power is uniquely positioned in the advanced reactor space, as it is the only company with a standard design approved by the U.S. Nuclear Regulatory Commission (NRC). It has one approval for its 50-megawatt-electric (MWe) SMR and another for its upsized 77 MWe SMR module. The standard design approval gave NuScale a first-mover advantage, which could put it in a better position to capitalize on commercial orders today.

That said, regulatory changes over the past year have reduced NuScale's standard design approval as a competitive advantage. That's because the Department of Energy launched the Reactor Pilot Program, which leverages its authority to reduce red tape and fast-track the testing and licensing of these new reactor technologies.

Under Executive Order 14300, the NRC must significantly compress its traditional regulatory timelines, which could take several years, down to just 18 months. With the accelerated approval process, competitors are no longer viewed as years behind NuScale Power. Instead, advanced reactors are getting streamlined approvals, limiting NuScale's competitive advantage.

What's next for NuScale Power?

NuScale has one project underway in Romania, which received a crucial Final Investment Decision earlier this year. The project aims to deploy six of NuScale's 77 MWe modules by 2033. However, NuScale will build one module, so stakeholders can evaluate the results before proceeding with the remaining five units.

In addition, NuScale is working alongside ENTRA1 Energy, which is helping NuScale find customers for its SMR reactors. One potential project is with the Tennessee Valley Authority for up to 6 gigawatts of nuclear capacity. NuScale has not yet signed a firm commitment on this project, but hopes to finalize an agreement by the end of this year.

For investors intrigued by the future of SMRs and optimistic about a deal with the TVA, NuScale's cheaper stock price, down 85% from its peak, makes it more appealing today. That said, it remains a high-risk stock amid accelerating regulatory approvals for competitors and a lack of firm commitments beyond its Romania power plant project.

Courtney Carlsen has positions in Alphabet, Meta Platforms, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, and Microsoft. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.