Oklo Is Still Pre-Revenue. Here's What Actually Has to Happen Before That Changes.

After a spectacular surge in value, Oklo (NYSE: OKLO) stock has had a meltdown of its own. That's not an exaggeration: The stock has lost about 80% of its value since last October. As it turns out, the half-life of Wall Street's enthusiasm ("nuclear renaissance!") was pretty short.

Wall Street has cooled on artificial intelligence stocks, and it has grown especially wary of speculative stocks like Oklo. For its part, Oklo, which once carried a $30 billion market value at its peak and remains at roughly $5 billion even after its drop, trades at a hefty price relative to the little revenue it generated last quarter (about $1.2 million).

All that leaves plenty of room for the stock to fall further if investors continue losing patience. Oklo likely won't regain investor confidence until it's selling nuclear power. And that likely won't happen until it overcomes a few major hurdles.

Image source: Oklo.

What needs to happen before Oklo generates revenue

For starters, Oklo is designing a small nuclear reactor, which it calls an Aurora powerhouse. These powerhouses will be assembled in factories -- potentially cutting costs and time to deployment -- and deployed to industrial sites and data centers to generate power on-site. These reactors, in turn, could help fill a gap in power generation, which is expected to widen as electricity demand outpaces utilities' ability to keep up.

Oklo has interested customers lined up, but it doesn't have a certified reactor. This is the first major hurdle: Oklo needs regulatory approval before it can commercialize its Aurora powerhouse. Although it is working through the process -- and has made impressive progress this year -- it does not have permission to switch on reactors and start selling power.

The company doesn't have a firm date for when it will turn on its first powerhouse. In the meantime, annual revenue will likely be insignificant, as the chart below illustrates.

OKLO Revenue (TTM) data by YCharts

We could stop at regulation, but let's go a step further -- for Oklo to generate significant revenue, it also has to build the powerhouse. Indeed, building a nuclear power plant isn't like rolling out a new running shoe. Nuclear power is notoriously expensive, and even if Oklo's reactors are small, high construction costs could force it to charge electricity prices that customers aren't willing to pay. That could turn away potential buyers, especially if cheaper solutions are available at that time.

Until it deploys its first reactor, Oklo's revenue will likely be small. Add to that the fact that Oklo will likely move at the pace of nuclear energy, which is to say slow, sometimes frustratingly slow, and this stock could struggle to regain its footing. If that pace doesn't agree with your time horizon, investing in Oklo might not be right for you.

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