Why Did NuScale Stock Drop 14.7% This Week?
Key Points
Enthusiasm for nuclear energy stocks cooled this week as investors reconsidered sky-high valuations.
Artificial intelligence (AI) models could become much more energy efficient, according to a research paper out of China making the rounds on Wall Street.
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Shares of NuScale Power (NYSE: SMR) fell this week, finishing down 14.7%. The move comes as the S&P 500 (SNPINDEX: ^GSPC) gained 1.9% and the Nasdaq-100 gained 2.2%.
The staggering scale of energy required for artificial intelligence (AI) data centers has fueled a major run-up for nuclear energy stocks across the board -- NuScale stock is up 110% this year so far.
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But this week, a few news items prompted investors to question whether AI's energy appetite will be as large as anticipated.
First, a Chinese research paper made the rounds, claiming that AI models can run much more efficiently without sacrificing performance. This was followed by the CEO of a major gas and wind turbine producer, who made comments some took to mean that growth might taper off.
Image source: Getty Images.
NuScale has regulatory approval
Unlike competitor Oklo, NuScale's reactor design is the only small modular reactor to have already earned full approval from the Nuclear Regulatory Commission. Still, the company has little revenue and significant ongoing costs. Just this week, analysts at two investment banks downgraded the stock to "sell" and "underperform."
The technology is promising, but it's not worth investing in at this price. I would wait for its valuation to come back to Earth before considering buying in.
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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.
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