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NuScale Power's stock is soaring because of a recent announcement over a nuclear power deal with Meta Platforms.
The company was not a part of the deal; it was with other nuclear energy companies.
The stock is risky because it does not generate any revenue or profit.
Shares of NuScale Power (NYSE: SMR) popped over 25% this week, according to data from S&P Global Market Intelligence. All nuclear energy stocks have soared on the backs of a new commitment from Meta Platforms, although NuScale Power is not a part of its partnership. The stock has struggled in recent months but is up 100% in the last five years.
Here's why NuScale Power stock was soaring this week, and whether it is a buy right now.
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This week, Meta Platforms announced the largest commitment to nuclear power in history. It is partnering to fund upwards of 6.6 gigawatts of electric power for artificial intelligence (AI) data centers, which is close to 1% of total current power consumption in the United States. In other words, a massive deal.
The three companies in the mix for this partnership are Vistra Corp, Oklo, and TerraPower. Each is providing different levels of electric power at various timelines over the next decade, which will be centered in Ohio. While NuScale Power is not a part of this deal, the announcement lifted the entire nuclear power sector. Oklo is specifically a builder of small modular reactors (SMRs), which is similar to what NuScale Power designs.
Outside of the announcement, NuScale Power also got a change in an analyst price target, although that has zero impact on its underlying business.
Image source: Getty Images.
NuScale Power has never built a nuclear reactor and has never secured any contracts for its SMR technology despite a certified design from the Nuclear Regulatory Commission (NRC). Investors should be concerned that it was not included in this deal with Meta Platforms.
The stock is trading up on the announcement, but it is actually bearish for the underlying business. NuScale Power stock trades at a market cap of $6 billion even though it has minimal revenue, never turned a profit, and has no contracts to speak of. Nuclear contracts take many years to build, meaning it will be years before NuScale Power ever generates a profit, if it can even win a single contract.
Stay away from this stock.
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Brett Schafer has no position in any of the stocks mentioned. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.
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