NuScale Power Stock Is Crazy Cheap -- Here's Why There Could Be 2,000% in Upside Potential

There's a long list of nuclear energy stocks potentially worth your investment dollars. But if you're looking for nuclear stocks with maximum upside potential, it's hard not to put NuScale Power (NYSE: SMR) near or at the top of that list.

After a brief correction, NuScale now trades at a market cap of just $4 billion. Another pure-play SMR stock, Oklo, has a market cap nearly 3 times larger. To be clear, I also think that Oklo shares have at least 1,000% potential upside. But due to its relatively diminutive valuation, NuScale shares arguably have even more upside. That's especially true when you consider a recent study that found the small modular reactor (SMR) market -- the exact type of technology that NuScale specializes in -- has a $1.5 trillion opportunity ahead of it.

Comparing NuScale's $4 billion market cap to a $1.5 trillion opportunity clearly shows how much upside potential this stock has. But before you jump in, it's important to understand two details.

1. NuScale is taking a very specific approach to SMR technology

Nuclear energy is experiencing a renaissance. "[N]uclear energy has, in many ways, been recently 'rediscovered' amid surging electricity demand," concludes a recent report by analysts at Bank of America. Surging electricity demand is a direct result of growth in the artificial intelligence (AI) industry, which relies on energy-hungry data centers for compute power.

Over the next few years, up to $7 trillion may be deployed worldwide to build more data center infrastructure. That means more and more power will be needed. A growing number of experts believe nuclear energy will play a key role in meeting this surging energy demand.

In total, Bank of America estimates that the nuclear opportunity over the next 30 or so years is valued at roughly $10 trillion. Before you compare this figure with NuScale's relatively tiny $4 billion market cap, there are two things to know.

First, Bank of America's estimates are for nuclear energy in general. NuScale, however, is focused on just SMRs. This category of nuclear, Bank of America predicts, won't experience meaningful adoption growth until 2030 or 2035. Second, NuScale isn't positioned to target the entire SMR slice of this pie. Its technological approach focuses on utility-scale deployments. Competitors like Oklo focus more on smaller, bespoke deployments useful for individual pieces of infrastructure, like a regional data center complex.

Still, one study estimates that the SMR opportunity could be worth $1.5 trillion over the next few decades. Even if NuScale takes just a piece of that opportunity, huge upside potential is possible. Assuming a stable share count, a 2,000% growth in NuScale's stock price would still result in a market cap of well under $100 billion. There's just one "catch" to be aware of before going all in.

Image source: Getty Images.

2. This $1.5 trillion opportunity won't appear overnight

There's lot of uncertainty here. We have growing confidence that there will be a massive AI data center build-out globally. But even the pace and scale of that build-out is questioned. Even if that build-out occurs as expected, we can't know for sure that nuclear will play as big a role as many experts predict. And within that role, we can't be sure how big SMRs in particular will become in terms of real-world adoption. Finally, even if SMRs grow rapidly in adoption, there is no guarantee that NuScale's grid-scale approach will be a key winner.

But let's say everything goes according to plan, and NuScale's technology ends up a key contributor to meeting the AI industry's surging demand for electricity. Even in this scenario, shares may take a decade or more to realize their 2,000% in upside potential. Put simply, NuScale is a potential monster stock, but the road ahead will be full of challenges, with extreme patience required for investors to realize the maximum upside potential.

Bank of America is an advertising partner of Motley Fool Money. Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.