1 Reason I Passed on Oklo Even After Its Big Rally

Shares of Oklo (NYSE: OKLO) jumped more than 12% on Aug. 25, reaching more than $44 per share. That's the good news. The bad news is that the small nuclear reactor company's shares are down more than 38% so far this year.

The bounce-back, while a positive sign for those who have already invested in this nuclear energy stock, won't be luring me anytime soon. The company went public through a special purpose acquisition company (SPAC) and began trading publicly in May 2025. There are a lot of reasons I'm planning to stay on the sidelines, but they can be summed up as one: Oklo's hype is outpacing its reality. Here's why.

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It's a pre-revenue company with a long horizon to profitability

Oklo has a market cap of around $8 billion, but it generates no commercial energy income today, and its first Small Modular Reactor (SMR), the Aurora Powerhouse, isn't expected to enter commercial operation for years. In June, Oklo announced that the Department of Energy's Idaho Operations Office had approved the preliminary documented safety analysis (PDSA) for the company's first deployment of its Aurora Powerhouse, which is under construction at Idaho National Laboratory. In the meantime, the company is incurring tens of millions in operating losses annually, which means sustained cash burn and an ongoing risk of share dilution if it needs to raise additional equity to fund construction.

In the second quarter, the company reported a loss from operations of $124.2 million. The net loss was $81.6 million, partially offset by $44.5 million in net interest and dividend income. The company has $1.6 billion in cash, but $78.6 million in debt, so interest and loan payments eat into its earnings.

Regulators are not sold yet on small modular reactors

SMR development faces one of the strictest regulatory environments in the world through the Nuclear Regulatory Commission (NRC).

Oklo was already denied an initial custom combined license application in 2022, with the NRC citing gaps in safety baseline data. Navigating approvals, reactor construction, and fuel supply chains, such as securing high-assay low-enriched uranium, or HALEU, on schedule is notoriously difficult, and single delays can push revenue out by years. The NRC and Oklo are still going back and forth on the potential approval for the company's Aurora. Regulatory bodies such as the NRC were designed to evaluate traditional, massive light-water reactors. Novel SMR designs, such as gas-cooled microreactors or molten-salt reactors, require custom safety evaluations, leading to multiyear approval timelines.

It's an expensive process, one reason why SMR competitor NuScale Power (NYSE: SMR) and its partner, Utah Associated Municipal Power Systems, dropped the Carbon Free Power Project (CFPP) in Idaho in November 2023 after projected costs ballooned from $5.3 billion to more than $9.3 billion.

Its valuation is still too high because of the hype

Fueled by market enthusiasm around powering artificial intelligence (AI) data centers, Oklo's stock has experienced extreme volatility. At a multibillion-dollar valuation, much of its long-term success is already baked into the price despite the company having zero proven operational track record at scale.

You can't analyze its valuation by traditional metrics since it doesn't have product revenue or earnings yet. However, its price-to-book ratio is around 2.5, meaning investors are paying $2.50 for every $1 of net assets (total assets minus total liabilities) reported on the company's balance sheet.

Any negative headline regarding licensing delays, technical issues, or broader pullbacks in AI infrastructure spending could trigger sharp drawdowns. I'm not saying the stock doesn't have tremendous long-term prospects, but the risks are too high for me until it has its first SMR approved and running.

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