Nuclear power is not new, but it is going through something of a renaissance today. One of the driving forces of that is the voracious demand for energy coming from data centers, particularly from artificial intelligence (AI) technology.
There are different ways to play the nuclear energy space, but two of the most interesting right now are Uranium Energy (NYSEMKT: UEC), which supplies power plants with nuclear fuel, and NuScale Power (NYSE: SMR), which is trying to build a business around producing small-scale modular nuclear power plants.
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What does Uranium Energy do?
Uranium Energy has an interesting story. When uranium prices cratered following the 2011 Fukushima nuclear power plant meltdown, Uranium Energy stepped into the market and started buying shuttered uranium mines and mine development projects and a stockpile of uranium. When uranium prices started to recover, the company generated cash by selling uranium from its stockpile. It used that cash to invest in the portfolio of mines and mine projects it had assembled.
Image source: Getty Images.
In August of 2024 it reopened a mine in Wyoming. And it added to its investment in the state later in the year when it bought assets from miner Rio Tinto. So, at this point, Uranium Energy is a legitimate uranium miner and it has significant growth prospects given the other assets it owns that it can develop.
The problem here is that uranium is a commodity. As such, Uranium Energy's top and bottom lines are going to fluctuate along with the price of uranium. There's really not a whole lot that anyone can do about that. Right now, the trend is toward higher prices because of the expectation of strong uranium demand.
However, it is worth highlighting that uranium spot prices peaked in early 2024 and have since been heading lower. There is good news around Uranium Energy's business, but uranium prices are still going to be the determining factor when it comes to earnings.
What does NuScale Power do?
NuScale Power is an upstart company looking to build and sell small-scale modular nuclear reactors. The company is proud to report that it is "the sole SMR technology approved by the U.S. Nuclear Regulatory Commission." Further, the company has "modules currently in production" and is seeing strong demand. There is a lot to like here, though the company does not yet have all of the approvals it needs to sell its reactors.
Small modular reactors are expected to be less expensive to build than large plants, easier to place where they are needed, safer because of their modern designs and size, and, as the name suggests, they can be chained together to build larger power plants. In fact, they could be placed right next to a data center to provide constant and dedicated power.
Assuming NuScale Power can get its technology over the finish line and get the approvals needed to start selling its product, it could have a very material business.
The problem, of course, is that NuScale Power isn't quite there yet. So it continues to bleed red ink. There is a real risk that it falls short of its business and financial goals.
That said, it has the backing of some very large companies, including construction company Fluor and steelmaker Nucor. Both could end up key partners in the manufacturing and construction process, with Nucor signed on to be an early customer. That suggests that NuScale Power is highly likely to get its product to market, which would be a key turning point for the company.
Which risk do you take in nuclear power?
Uranium Energy has an operating business in the nuclear power space and the opportunity for growth ahead. But the company's earnings, and likely its stock price, will fluctuate along with uranium prices. In other words, owning it could be a bumpy ride and there's no guarantee that management will be able to make successful calls on the uranium market in the future like it has in the past.
NuScale Power hasn't gotten its business off the ground quite yet, but it has notable partners and technology that could displace current nuclear power plants. If it manages to start selling its modular nuclear reactors, it could quickly become a very attractive business to own. Both companies are high risk/high reward propositions.
From a big-picture perspective, conservative investors should probably avoid Uranium Energy and NuScale Power. But if you can handle some risk, NuScale Power likely offers the potential for more consistent growth over time. That will make it the better choice for most investors. Only investors willing to ride the volatile ups and downs of commodity markets should be looking at Uranium Energy.
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Reuben Gregg Brewer has positions in Nucor. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
