A sector struggling with risk
Next-generation nuclear energy stocks have endured some of the worst declines in the stock market, with a number of companies losing over half their value. Two of the largest names in the sector are Oklo and NuScale. Oklo, which holds a market capitalization of $7.5 billion, has lost 75.1% of its peak value. NuScale Power, valued at $3.1 billion, has seen its shares fall by 82.2%.
Both companies are working on the development of small modular reactors (SMRs), which are intended to offer improved safety and efficiency compared to traditional reactors. However, none of the reactors are currently operational, and the technology is still in the development or early deployment stages.
Standard Nuclear, the youngest company among those listed, recently made its debut on the Nasdaq and has lost 44.3% of its value. Despite the sharp decline, the company carries a market cap of $1.4 billion. However, Standard Nuclear’s revenue in the first quarter of the year was just $593,802. This suggests that its valuation is not supported by strong financial performance at the moment.
Slow progress and regulatory hurdles
The path forward for many of these companies is delayed due to regulatory and bureaucratic challenges. For example, X-Energy is awaiting approval to begin construction on a plant in Texas, where it plans to build a four-reactor nuclear facility in collaboration with Dow. However, the company may not be able to begin construction until early 2027, due to the ongoing review of its application by regulators.
Nano Nuclear Energy is another company facing similar hurdles. It is down 67.9% from its peak, and is working on a smaller reactor known as a modular microreactor (MMR). The company is preparing to submit a construction permit for the reactor, which it plans to build on the University of Illinois campus. If approved, the reactor might begin operations between mid- and late 2027.
Despite their promising technologies, these companies are still largely unproven in the real world. Their valuations reflect expectations and potential, rather than current revenue or operational success. For these companies to achieve their goals, they must secure regulatory approval and successfully build their reactors, both of which are time-consuming and uncertain processes.
Investors remain cautious
Because the reactors are still in development or in the early stages of construction, it may be years before they start generating electricity. Until then, investors are hesitant to commit money to companies that are not yet producing reliable returns.
One major issue is the lack of deployed reactors. NuScale has received design approval from U.S. regulators, but it has not yet moved beyond the production of modules and has not begun construction. Oklo is in the process of building a prototype at the Idaho National Laboratory with support from the Department of Energy, but the prototype has not yet gone live.
Market analysts argue that the valuations of these companies remain high, given the uncertain outcomes and the risks associated with investing in pre-commercial technology. While the recent drop in prices could present an opportunity for investors with a high-risk tolerance, the potential for growth remains limited until these reactors start producing power and generating consistent revenue.
Until the first operational reactors come online — which could be at least a year or more away — these companies may continue to struggle with investor confidence. Additionally, some may need to raise additional capital in the interim, which could dilute existing shareholders' stakes and further reduce value for current investors.