On Tuesday (November 25), shares of small modular reactor (SMR) developer NuScale Power (NYSE: SMR) closed down 6% for the day, underperforming the broader market (the S&P 500 index rose 0.9%). The decline was directly triggered by two key negative factors: UBS analyst Jon Windham significantly cut the stock’s price target from $38 to $20, a reduction of nearly 50%.
Meanwhile, procurement talks between Meta and Alphabet for high-efficiency TPU chips sparked market doubts about the projected surge in energy demand from AI data centers. It is worth noting that NuScale’s stock price has now fallen more than 40% from its all-time high of $57.42 on October 16, reflecting growing market concerns about the company’s near-term prospects.
UBS analyst’s decision to maintain a “Neutral” rating on NuScale stock while drastically lowering the price target highlights institutional investors’ cautious stance towards the company, including concerns about cash flow and delays in commercialization.
The analyst explicitly cited concerns regarding the cash flow situation of NuScale’s core projects. The company’s third-quarter revenue of $8.2 million (primarily from engineering services for the RoPower project in Romania) fell far short of market expectations, and the quarterly loss reached $273 million. Lacking earnings support, the current stock price still carries a significant premium relative to its substantive revenue base, even after the notable pullback.
The core thesis that previously drove NuScale’s stock higher – an explosion in energy demand from AI data centers – is now facing real-world challenges:
Shift in Technology Path: Meta’s consideration of adopting Alphabet’s TPU chips, which are significantly more energy-efficient than traditional GPUs, could substantially reduce energy consumption per computation.
Demand Expectation Revision: If high-efficiency chips become the industry standard, the growth in AI’s strain on the power grid might be lower than the market’s most optimistic previous forecasts.
Competition from Alternative Energy Sources: The long construction cycles and high costs characteristic of traditional nuclear power pose inherent disadvantages in meeting the flexible and variable energy demands of AI.
Despite facing short-term pressures, NuScale still possesses long-term value supports that cannot be ignored. As the only SMR company with design approval from the U.S. Nuclear Regulatory Commission (NRC), it enjoys extremely high industry barriers. Furthermore, the U.S. Army’s “Janus Program,” which explicitly plans to deploy microreactors at military bases worldwide, provides a potential source of future orders for the company.
SMR technology is suitable for remote locations and specific application scenarios, creating differentiated competition against traditional nuclear power plants. The deployment flexibility offered by its modular design remains a unique advantage in certain niche markets.
Overall, due to delayed commercialization progress, tight cash flow, and the potential invalidation of the AI energy demand narrative possibly continuing to suppress its valuation, NuScale’s stock still faces near-term downside risks. Concurrently, the landing of any government contracts or substantive advancement in partner projects could trigger a re-rating.
For long-term investors with a higher risk tolerance, the current price already reflects most of the pessimistic expectations, while the company’s unique positioning in the nuclear energy sector and policy support advantages remain intact. However, until the company achieves sustainable revenue, its stock price is likely to continue exhibiting high volatility.
