My Honest Opinion of Oklo Stock

Nuclear start-up Oklo's (NYSE: OKLO) stock has had an incredible run so far this year. After climbing 250% in the first half of the year, shares raced higher in September, when the company broke ground on its first-ever prototype nuclear facility.

That explosive growth stalled out last month, however. The company's shares briefly peaked at $174.14 a share, and then dropped more than 25%. Can Oklo's stock regain its mojo, or are investors in for further losses? Here's what I really think.

Theoretically, it's a winner

Although the nuclear science underlying Oklo's Aurora Powerhouse small modular reactors (SMRs) has a long track record, the specific way the company plans to deploy its tech is still basically untested. That may sound like a contradiction, but it's not.

Oklo is building a prototype SMR -- a nuclear reactor that has a much smaller footprint than a traditional nuclear facility. At least two SMRs are currently operational in Russia and China, so we know that SMRs can operate successfully. However, Oklo is also planning to build a slightly different type of reactor: A sodium-cooled "fast reactor," as opposed to the traditional water-cooled reactors used by most current U.S. nuclear plants.

Full-size fast reactors have been used successfully in the U.S. before, so this technology isn't new either. However, combining the two technologies to create a fast reactor SMR would be a first -- in the U.S. or elsewhere.

To be clear, the worry is less that the reactor won't work at all, and more that it won't be cost-effective at scale due to potential high infrastructure costs or potential limitations on the amount of power the smaller reactor can produce. In other words, we won't know if it works until it works, and it won't even be tested until next year at the earliest.

Image source: Getty Images.

It's all just speculation

Until then, regardless of what I think about the science or the potential scalability of the technology -- and I am optimistic about both -- the stock is essentially a binary bet on an unknown outcome, much like investing in a biotech company with a potential blockbuster drug in clinical trials. If it works, the stock should rise. If it doesn't, the stock will likely tank. And nobody knows which it'll be.

That means that when the stock makes big moves -- like shooting up 161% in January and February of this year before giving back all those gains by April -- it's not due to any concrete information about the company's finances (Oklo has no current revenue) or technology (which hasn't been built yet). It's just investors jumping in and out based on guesswork.

If you think the company's technology is likely to succeed, now looks like a good time to buy the dip, with the stock more than 25% off its recent highs. But keep in mind that we won't know whether Oklo is a winner for at least six months, and probably longer, during which time the stock is likely to be very volatile.

So my honest opinion is that only investors with very high risk tolerance should consider buying Oklo at all, and even they shouldn't use money they can't afford to lose.

John Bromels has positions in Oklo. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.