NuScale Power Is Down 79% -- Here's Why That's Great News for Long-Term Investors

It's been a tough ride for NuScale Power (NYSE: SMR) investors. Since the year began, shares have lost around 30% of their value. Since highs set last summer, however, shares have lost an astounding 79%.

But here's the thing: This promising nuclear stock still has strong long-term growth potential. In fact, almost nothing has changed about NuScale's ultimate potential. That means investors today can buy into this potential growth at a heavy discount compared to former investors.

Before you jump in, there are two important things to understand.

1. NuScale Power isn't the only nuclear stock struggling right now

It's important to understand that NuScale's recent stock price collapse isn't necessarily due to something the company itself did. Other SMR stocks are also struggling. Oklo (NYSE: OKLO), for example, has lost nearly two-thirds of its value since last October. That's a smaller drop than what NuScale has experienced, but it's devastating all the same.

Why are SMR stocks, in general, sharply down in value over the past six to 12 months? The answer is both complicated and simple at the same time.

These companies are attempting to pioneer a relatively unproven technology, at least when it comes to real-world applications. Even just from a sheer regulatory approval and permitting perspective, there's a long way to go until we see SMR capacity scale worldwide in any meaningful way. Only two SMRs are currently active, both of which are located in Asia. Dozens are in some stage of planning, but how many ultimately get built remains to be seen. Both Oklo and NuScale have seen potentially large projects stall before construction began. Even small updates related to potential adoption or project advancement can have a significant impact on an SMR operator's stock price.

The simplest explanation, however, is that SMR stocks like NuScale remain years, if not decades, away from reaching their true potential. A bet on NuScale today, therefore, is a bet on a distant potential future. The simple difficulty of valuing an opportunity like this will continue to result in heavy volatility, both up and down, even devoid of concrete updates related to project pipelines.

Image source: Getty Images.

2. Expect more volatility despite promising growth potential

NuScale's ultimate growth potential has not changed. AI data centers still need massive amounts of additional electricity generation capacity to sustain growth. And SMRs are a promising solution to that challenge. Oklo is taking a more bespoke approach by marketing its systems directly to data center operators. NuScale, meanwhile, is looking to deploy grid-scale projects. In both cases, however, there should be plenty of adoption potential for decades to come.

This is both the challenge and opportunity in NuScale stock today. The potential remains huge and promising. The company's market cap, meanwhile, is relatively diminutive compared to the opportunity ahead. But it will be many years until we learn whether NuScale's systems can come online on time and on budget, not to mention whether its grid-scale approach is suitable for growth.

The recent stock price collapse has enabled investors to put more money to work at lower valuations. But volatility will remain the norm.

Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.