Oklo's 1000% Surge Faces Skepticism from Goldman Sachs: Can the AI Boom Justify the Nuclear Giant's Valuation?

TradingKey - On Wednesday, September 24, Goldman Sachs issued a "neutral" rating for nuclear power leader Oklo, setting a price target of $117 and forecasting a decline in the next year. As a result of this rating and insider selling, Oklo's stock retreated by 9% on Thursday, although it has surged 1347% over the past year.

Goldman Sachs highlighted that Oklo has benefited from Trump's executive order to expedite new nuclear deployments, along with the increasing power demand driven by AI data center construction. These factors contribute to its promising outlook filled with potential positive catalysts.

Chris Tessin, founder of Acuitas Investments, commented that Oklo exemplifies a "story stock," a company traded on an exciting narrative rather than financial metrics. Oklo focuses on developing and constructing small modular reactors (SMRs), directly selling the generated power to customers. It is intricately linked to the booming AI industry by providing clean energy necessary for AI data center construction. Furthermore, OpenAI CEO Sam Altman owns a 5.5% stake in the company and served as its chairman until April this year.

Analysts have noted that Oklo presents a compelling AI story, attracting investors willing to take on higher risks, which is a primary reason for the market's bullish sentiment on the stock.

Goldman Sachs pointed out that the company's current bottleneck lies in its stock price, which appears to have already absorbed the market's high expectations for its future. However, its elevated valuation, capital-intensive heavy-asset model, substantial operational costs, fuel supply bottlenecks, and uncertain licensing and commercialization timelines all exert pressure on its stock price.

Oklo adheres to a "build-and-operate" heavy-asset business model, which carries significant financial risks and capital intensity. Goldman Sachs estimates that Oklo will need to raise approximately $14 billion by the mid-2040s to sustain its operations and expansion. Additionally, Oklo relies on high-assay low-enriched uranium, necessitating substantial investment and expansion of its fuel supply system.

Although Oklo has accumulated over 14 GW of potential orders, all agreements are letters of intent (LOIs) or non-binding agreements, with the only tangible progress being a $25 million prepayment from Equinix.

The company aims to achieve the commercial operation of its first reactor by late 2027 or early 2028. However, its commercialization timeline is largely dependent on the approval process of the U.S. Nuclear Regulatory Commission (NRC). Oklo has yet to secure NRC approval, having had an application rejected in the past.

Goldman Sachs believes that despite the imaginative appeal of its AI narrative, the high degree of uncertainty and excessive valuation render its current stock price unattractive.