Why Shares of Nano Nuclear Energy Stock Collapsed Last Month

Shares of Nano Nuclear Energy (NASDAQ: NNE) stock slipped 31.2% last month, according to data from S&P Global Market Intelligence. As start-up aiming to develop portable micro nuclear reactors, the stock has soared close to 700% since going public on the back of the artificial intelligence (AI) and nuclear energy trade. In November, these themes went in reverse, knocking down virtually every stock in the sector -- including Nano Nuclear Energy -- along with it.

Here's why Nano Nuclear Energy stock fell last month, and whether it is a buy today.

A micro nuclear reactor company (in theory)

Nano Nuclear Energy is aiming to solve one of the existing problems with nuclear power: the cost per reactor. Existing designs are massive -- and while they are perfect for large-scale utilities -- they need loads of upfront financing and can take a decade to build. As its name implies, Nano Nuclear is designing smaller reactors that can be used for niche purposes, such as an AI datacenter.

This logic has sent Nano Nuclear stock into the stratosphere. When this trade began to unwind last month, Nano Nuclear stock fell along with the rest of the AI and nuclear energy sectors. There's not much else to it.

It had nothing to do with Nano Nuclear's financial performance, as there is none. It has never generated any revenue. In fact, it does not have a working design approved by the Nuclear Regulatory Commission (NRC), meaning it cannot legally build a reactor right now, and may not be able to for years.

Image source: Getty Images.

The truth about Nano Nuclear Energy

Management for Nano Nuclear talks big, but has no proven working reactor. It is burning tens of millions in free cash flow every year, and has had to heavily dilute shareholders through common stock offerings in order to shore up its balance sheet.

This is a company with an unproven technology, rising share count, heavy cash burn, and no path to a working business model. Despite this recent pullback, Nano Nuclear Energy stock looks like a stock investors should avoid buying, no matter how low the share price falls from here.

Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.