A fresh U.S. directive and U.K. government funding have ignited massive investor interest in nuclear energy stocks.
NuScale Power, however, continues to carry major risks that investors cannot overlook.
A 40% rally in a matter of days usually signals a breakthrough. In the case of NuScale Power (NYSE: SMR), it's a powerful shift in sentiment for the nuclear energy industry. Shares of the nuclear energy start-up skyrocketed 44.4% at their highest point in trading this week, according to data provided by S&P Global Market Intelligence.
The nuclear energy renaissance was on full display this week, with massive updates coming from the U.S. and the U.K., including big investments in small modular reactors (SMRs) -- the kind of nuclear reactors NuScale Power specializes in.
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On April 14, the White House unveiled the National Initiative for American Space Nuclear Power, a national program to develop and deploy nuclear reactors for space and defense applications. Led jointly by NASA and the Department of Defense with participation from private companies, the directive has set hard deployment timelines, including nuclear reactors in orbit by 2028, a mid-power reactor for the Moon by 2030, in-space reactors by around 2031, and scalable high-power reactors in the 2030s.
That same day, April 14, the U.K. government announced a 599 million pounds (around $800 million) funding for Rolls-Royce's SMR program.
The White House directive and the U.K. government-Rolls-Royce deal signal a growing, policy-backed global demand for nuclear power, including SMRs. That's reinforcing the technology's commercial viability and driving investor interest in nuclear energy stocks like NuScale Power. NuScale Power is building SMRs called VOYGR based on its proprietary power modules.
The market's perception of nuclear power appears to be improving by the day, thanks primarily to policy tailwinds in the U.S. and global momentum for SMRs. NuScale Power's fundamentals, however, haven't changed overnight.
The company is still years away from commercializing its SMR technology, and has lately been in the headlines for all the wrong reasons, including concerns about the nature of its relationship with its exclusive commercialization partner, ENTRA1 Energy, and a potential delay in a major project. It's worth taking a step back and considering these factors before buying into the rally in NuScale Power.
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Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool recommends NuScale Power and Rolls-Royce Plc. The Motley Fool has a disclosure policy.