Should You Buy the Dip on Oklo?

Oklo (NYSE: OKLO) stock has been on a bit of a roller-coaster ride lately. After peaking at over $190 a share in mid-October of last year, the stock has lost roughly two-thirds of that value to trade at about $66 today.

The volatility is, of course, to be expected. Oklo is a pre-revenue advanced nuclear company that's riding on the promise of delivering always-on power to clients -- like data centers -- that need it badly. However, it doesn't have regulatory approval for its nuclear reactors, and it likely won't generate any commercial revenue until at least 2027.

Even so, a lot has been swinging favorably for the microreactor would-be operator. Earlier this year, Oklo announced a blockbuster agreement with Meta Platforms to develop a 1.2 gigawatt (GW) power campus in Ohio to help Meta's data centers in the area. Oklo was also selected last year by the Department of Energy (DOE) to participate in a pilot program aimed at fast-tracking licensing for advanced reactor designs like Oklo's.

Image source: Oklo.

Those developments raise an obvious question: should you consider buying Oklo on the dip? Or should you wait?

A promising story, but real risks remain

Oklo is designing nuclear microreactors that can deliver clean, always-on power. The idea is that, one day, it will deploy these reactors wherever power is needed, whether that's a remote research lab in Antarctica, or a data center campus in Tennessee. Like a utility, customers will then purchase electricity from Oklo under long-term contracts, creating recurring revenue for Oklo.

Who exactly would be interested in buying electricity from Oklo? Companies mostly, but really anyone who needs reliable, carbon-free power. The beauty of Oklo's model is that it could be a go-to source for electricity where the grid is weak or too carbon-heavy. That means not just data centers, but cities, towns, military sites, and mining camps.

Indeed, the global opportunity for microreactors could be enormous. Research from Research and Market projects that the global small modular reactor market could grow from about $160 million in 2024 to more than $5 billion by 2035, a compound annual growth rate (CAGR) of 42%.

It's promising, but investors have to look at the whole picture. Right now, a lot could go wrong, and obtaining regulatory approval is only one piece of the risk. Oklo still has to prove it can build microreactors at scale and create strong enough margins to make the business profitable. Oklo has zero revenue right now, and if projects take too long -- or cost more than expected -- it could be forced to sell more stock or take on debt.

For now, Oklo absolutely must get a license from the Nuclear Regulatory Commission to commercialize its reactor designs. With a market capitalization of about $10 billion, and zero revenue to show for it, that lack of an NRC license will make this "large-cap" stock extremely volatile in the near term.

Weighing the opportunity against the risks, I see long-term potential in holding Oklo. At the same time, the stock is today propped up mostly by hype and expectation; put differently, it might not be at the bottom of the dip yet. As such, it's best for aggressive investors who can hold on through what will likely be some shaky years ahead.

Steven Porrello has positions in Oklo. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.