NuScale Power (SMR Stock): Should You Take the Risk To Invest In Small Modular Reactors?

TradingKey - NuScale Power (OTC:SMR) is trying to establish a foothold in the energy space with small modular nuclear reactors (SMRs) — a theme touted as safer, less expensive, and more flexible than conventional nuclear power plants. The potential of modular reactors has drawn the attention of investors, but this stock remains disconcertingly volatile and the company’s first commercial sale is still on the horizon, meaning shareholders face a massive execution risk.

NuScale’s ambition and the context of the market

The “glue” that holds the energy market together is changing. This trend is being driven by increasing consumption of dependable, low-carbon energy sources such as those required to support the growing number of electric vehicles, AI-centers, and the decarbonization of the world. NuScale also advertises its small modular reactors as a way to offer more local, smaller-scale nuclear power. They are factory built, and engineered to be transported to the site and assembled more quickly than conventional site-built nuclear power plants.

The company has yet to close its first sale, despite potential upside. Romanian utility RoPower is considering a project featuring six NuScale reactors, but the final investment decision won't be taken before 2026 at the earliest and it hinges on financing. Domestically, NuScale’s collaboration with ENTRA1 to create a modular reactor site in the U.S. is in the initial phases of US: Until a utility actually builds a reactor and is running a source of income, revenue is secret and long-term profits are uncertain causing share prices to swing wildly.

Volatility represents early stage execution risks

NuScale Power’s shares have been subject to wild fluctuations in the last year. Although it had a run of over 130% at best, a series of retracements wiped out most of that advance. During three months in particular there was a nearly 55% plunge, demonstrating how news and execution delays make investors nervous.

This up-and-down drama is par for the course for start-ups in capital-intensive fields. For investors, it highlights the necessity of having a very high risk tolerance and a view that near-term price performance may not be reflective of the long-term potential of the technology.

The first sale: a pivotal milestone

The company’s immediate challenge is to prove that its technology works in commercial contracts. A confirmed sale, especially with RoPower, is probably going to be NuScale's critical proof point. Without this it is hard to prove the business model and get more industrial or utility customers. Delays in closing such deals — now delayed by about a year — compound that uncertainty.

Getting the first sale not only would validate the technology, but would also lead to the start of reactor fabricating, which can be a “potential inflection point for SMR stock,” he said. Until then, investor confidence remains hostage to speculation on project approvals and market adoption of modular nuclear technology. 

Strategic optionality and growth prospects

There are several potential growth drivers that NuScale reactors, if successfully deployed, could capture: increasing power demand, regulatory incentives for low-carbon energy, and the modular design permits deployment on a wide variety of sites, including industrial or data center sites.

Additionally, the company’s potential to scale its business in a capital-efficient manner could yield sustainable competitive advantages, which could ultimately make NuScale a nuclear power analog to “the cloud” in combining nuclear’s reliability with modern flexibility and safety.

Risks and market sentiment

The upside for NuScale is shadowed by obvious risks:

• Risk of execution: There has not been a completed commercial sale yet, with first contracts delayed to 2026-2027.
• Monetary risk: The company is constantly burning through its funds and making very little income.
• Investor sentiment: Recent steep sell-offs suggest Mr. Market is not convinced. Behavioral finance theories suggest that pessimistic market sentiment may be a contrarian indicator, however only for investors with a high tolerance for risk.

Investor takeaway: a roll of the dice with the possibility of big returns

NuScale Power is a gamble, early-stage stock. Investors with a bullish view on the potential for modular nuclear power may want to consider that today’s prices are a buying opportunity, in particular given the long-time horizon of the technology. For those investors who aren’t risk-tolerant, there doesn’t seem to be any better course of action than to wait, and see if the company can get its first firm order, and demonstrate that it can operate.

In the end, SMR stock is a play on execution and the adoption of new technology, and not just an average equity play. NuScale’s success will be determined by its capacity to deliver reactors, raise funding for its customers, and scale up — all will determine not only the future of the company, but also the trajectory its share price may take.