Nuclear Goes Nucular!

“Oh for Pete’s sake, Millicent! They’re writing about nuclear stocks again!”

Yes, yes we are. Sorry, but we have to…

Take a look at the list of Top Gaining Stocks for today and you’ll probably see a lot of familiar names.

If you’ve been reading Outsider Club for a while, you’ve seen many of these names. We’ve been advising you that the massive electricity demands from AI will be satisfied by nuclear power since April.

Less than a month ago – on September 24 – I wrote that the nuclear bull market was here.

We first wrote about NuScale Power (NYSE: SMR) on May 1 when the stock traded for $5.75 a share. The most recent write-up was 3 weeks ago, with the stock at $12. NuScale is hitting $18 a share today. That’s a 50% gain in three weeks, or 213% since May…

We recommended America’s largest independent nuclear power supplier Vistra (NYSE: VST) on August 18 at $79.35. We recommended taking that 79% gain on October 3, when the stock hit $136.

On June 13, we told you Constellation (NYSE: CEG) was likely to reopen the Three Mile Island nuclear plant. The stock was $220 at the time. Constellation shares shot up to $250 on September 20 when it announced that it was, in fact, reopening Three Mile Island, and Microsoft had signed a 20-year power purchase agreement. The stock peaked at $285 a share.

We talked up the only American company that can enrich uranium – Centrus Energy (NYSE: LEU) – when the stock was $43 a share. It’s up 17% today (!) to over $72.

Hammer and I are here to help you make money with stocks…

Good Stories Get Better

There has been a relentless string of positive news coming out of the nuclear sector.

Yesterday, it was Google taking a stake in privately held Kairos Power. Kairos is another one of those upstart Small Modular Reactor (SMR) companies. Today, it was Amazon (NASDAQ: AMZN) announcing that it is funding a feasibility study for an SMR site in Washington state.

Now let’s dig into what all this actually means…

A Small Modular Reactor is just what it sounds like – a smaller version of a nuclear reactor. But the size difference is important. They can be built faster and the pressure levels are much different than with a larger reactor, so in theory, they should be cheaper to build…

In theory: that’s an important point. Because right now, there is only one company that has an SMR design that’s gained the approval of the Nuclear Regulatory Commission NRC). That’s NuScale (NYSE: SMR). And it wasn’t easy…

I detailed the issues NuScale faced in getting regulatory approval here, but, to sum it up – as of now, the NRC is still using utility-scale nuclear power standards to approve SMR designs. So the NRC forced NuScale to redesign its pressure vessels to be 20X stronger. That in turn, increased costs to the point that NuScale’s first planned deployment had to be scrapped.

The partner that Google announced yesterday, Kairos, has only managed to get approval for a demonstration deployment.

You may be aware that OpenAI co-founder Sam Altman brought SMR company Oklo (NASDAQ: OKLO) public via a merger with his SPAC. The NRC took two full years to review Oklo’s SMR design – and then rejected it.

Another SMR company, Terrapower (backed by Bill Gates) had its construction permit approved for review by the NRC back in May. If Oklo is any indication, it could be another year before Terrapower can start building…

The takeaway here is that Small Modular Reactor technology is a few years away from actually generating power for anyone. For instance, Google’s deal with Kairos isn’t expected to be operational until 2030…

The SMR Playbook

So, you might be thinking, “Well 5 years down the road, aren’t these stocks getting a little ahead of themselves?”

You’re probably right, for the short term at least. If you get a bunch of small stocks running +30% in a day, they’ll probably pull back some. And if you’ve owned these stocks, you should be taking something off the table here…

Because while the story has been nothing but positive so far, emerging tech always follows a pretty predictable pattern. There’s the hype phase which we’re in right now, and which could be hitting a crescendo right now.

Next will come the “cold water” phase – when mean ol’ hedge funds and short sellers attempt to poke holes in the story, throw some cold water on the bulls, and shake out the weak hands.

In fact, one short-seller firm, Hunterbrook, already released a hatchet job report on NuScale back on July 29 that knocked the shares from $11 down to $7 over the course of a week. This will happen again. Maybe not to NuScale, but hatchet jobs are pretty easy money for the short-seller firms. Be ready…

Still, this “good story that gets better” has another chapter – a change in the NRC approval requirements. It’s pretty obvious that the NRC standards are archaic. They are almost certain to change to be more conducive to SMR technology. I mean, you’ve got Microsoft, Google, Sam Altman, Bill Gates, and Amazon all pushing for this technology.

That’s a pretty powerful lobby right there. Chances are very good they will get what they want…

Cheers,

Briton Ryle
Chief Investment Strategist
Outsider Club

X/Twitter: https://twitter.com/BritonRyle

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