Here's Why I Wouldn't Touch Nano Nuclear With a 10-Foot Pole

It would be hard to find someone who isn't aware of artificial intelligence (AI) after it has gone mainstream over the past couple of years. However, I'm willing to bet that most people aren't aware of just how much power is required for AI to function as it does today.

Today's data centers -- which are critical for training and deploying AI -- can use enough power in a month to power thousands of homes for a year. That's an issue Nano Nuclear Energy (NASDAQ: NNE) is aiming to address with its micro nuclear reactors. Despite these ambitious plans, it's a stock I'm staying far away from for the foreseeable future.

Image source: Getty Images.

What Nano Nuclear is promising

The idea behind Nano Nuclear's micro nuclear reactors is to have a portable power plant that can be shipped and deployed virtually anywhere that a steady stream of electricity is needed.

This is a much better alternative than relying on diesel or power grids, as the former causes significant pollution and the latter can't keep up with AI demand. In theory, the technology would provide ready-to-go energy that could last nearly 20 years without refueling.

Why I'm steering clear of Nano Nuclear

The problem with Nano Nuclear's business idea is that it's just that: An idea. At this time, the company doesn't have a tangible product available for commercial use. This means it doesn't have any revenue coming in, yet it's spending millions on research and development, trying to develop a product that can get government approval.

Nano Nuclear's product would need to get approval from the Nuclear Regulatory Commission, which is notoriously strict when it comes to approving new nuclear energy designs. It's a process that will take years, in all likelihood, and that's assuming Nano Nuclear doesn't run out of cash or face any setbacks before getting to that point.

In reality, it's a business that could be at least a decade away from selling a working reactor and generating any profit.

Unfortunately, there are larger, more established companies (like TerraPower and NuScale Power) with bigger bank accounts that are also working on the same idea. These companies have a much longer leash when it comes to bringing the ideas to life, which somewhat makes Nano Nuclear the underdog in this race.

If I'm putting my money into a stock, I need more than just an idea that could take years to materialize. I can stomach a growth company that's not yet profitable. I personally can't stomach one that's pre-revenue.

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