Key Points
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Duke Energy is exploring ways for hyperscalers to help fund the construction of new nuclear power plants.
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If this idea gains traction among major tech companies, small modular reactor (SMR) developers could benefit greatly.
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One SMR company in particular that could benefit is Oklo, especially due to its growing ties with tech giants such as Meta Platforms.
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The artificial intelligence (AI) data center boom is pushing hyperscalers to demand more electricity, particularly from “carbon-free” sources such as nuclear power. However, the traditional process of building new nuclear power plants is costly, time-consuming, and risky for utility companies.
Duke Energy (NYSE: DUK) is proposing a creative alternative. The large utility, which operates mainly in the U.S. southeast, is proposing that big tech companies help fund the construction of new nuclear power plants.
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If the big tech hyperscalers buy into this idea, this could create a win-win scenario for many stakeholders. Utilities can capitalize on the data center trend while minimizing downside risk. Data center build-outs could accelerate.
Alongside this, early-stage nuclear companies, which have so far struggled to turn their technology into tangible projects, could also get a boost. In particular, one nuclear start-up, which is already well connected to the hyperscalers, stands to benefit greatly.
Image source: Getty Images.
Duke Energy and its nuclear proposition to big tech
Historically, the construction of new electric power plants has been solely the domain of regulated utility companies. Regulated utilities borrow or raise additional equity capital to build a plant, with regulator-approved rate hikes helping to pay off construction costs.
This model may work fine for traditional coal- and gas-fired plants, but it’s a risky strategy for nuclear power plant construction. Nuclear power plant projects often fall behind schedule, with final costs exceeding initial forecasts. Worse yet, the time lag between putting up the capital for these new plants and recovering costs through rate increases puts regulated utilities in a financial bind.
That’s why, despite the robust and still-growing demand for new nuclear power capacity, utilities remain cautious about pursuing new projects. Moreover, that’s why Duke, looking to capitalize on the trend yet at the same time limit downside risk, is making its “nuclear proposition” to the hyperscalers.
If this proposal helps to spur a more rapid development of nuclear power capacity, the greatest beneficiaries could be nuclear technology start-ups, especially developers of small modular reactors (SMRs). There are numerous public companies involved in the SMR sector. Nuclear energy stocks NuScale Power and Nano Nuclear Energy may come to mind first, but one stock that may benefit from this proposal is Oklo (NYSE: OKLO).
Oklo: Well positioned for this idea
Just like its competitors, Santa Clara, California-based Oklo is an early-stage, pre-revenue company. Yet while its shares have declined like those of its competitors, they have held up relatively well. Recent regulatory progress with its first major project may be a big reason for this, but Oklo has other strengths as well.
Namely, the company already has existing ties with tech giants like Meta Platforms. If Duke is successful in getting Meta and other big tech companies to agree to its customer-financed power plant idea, these companies could look to Oklo rather than NuScale or Nano Nuclear Energy to provide the technology and know-how to build these plants.
Don’t get me wrong. Oklo remains in start-up mode, relying on dilutive stock sales to fund operations and growth. Moreover, the company’s $10 billion market cap already reflects potential upside from commercialization opportunities.
However, if Duke’s idea gains traction and companies like Meta start funding the construction of utility infrastructure, such as SMRs, to power their data centers, Oklo could once again become one of the most popular speculative growth stocks. The stock may not climb back to its high-water mark, which was nearly three times its current trading price. However, don’t rule out the potential for a catalyst like this to have a dramatic impact on the Oklo stock price.
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Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool recommends Duke Energy and 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.
