NuScale Rockets Higher on Amazon Deal: How High Can It Go?

Key Points

• Amazon's interest in nuclear shows the technology is reaching a critical mass, and the industry is about to boom.
• NuScale Power Company has the only U.S.-regulated SMR available. 
• The market is up more than 500% this year and can continue higher, possibly hitting $22.50 by early 2025.

Amazon’s NASDAQ: AMZN latest foray into nuclear energy shows the technology has reached a critical mass. Long known to be a critical component of carbon reduction goals, costs, time constraints, and safety were barriers. Today's difference is Small Modular Reactor technology, which is about to blossom. The name says it all: SMR focuses on smaller, modular reactors that are more accessible, more cost-efficient to build, and scalable, a win-win for today’s big tech companies. Companies like NuScale Power Company NYSE: SMR, which develops SMRs, are positioned to win as the industry blossoms. 

Big tech companies like Amazon, Microsoft NASDAQ: MSFT, and Google NASDAQ: GOOGL are leaning toward SMR technology to power their data centers. Data centers use the most advanced, highest-powered semiconductors and servers, consuming far more power than any technology that has come before. Recent estimates show that power consumption per AI data center is 1.5x that of their predecessors or higher, with the number of DCs growing and technology advancing rapidly. The technology is also critical to corporate carbon neutrality plans. It also has a bonus: SMRs will support the national grid, not just the power-hungry AI data centers built alongside them, reducing demand for carbon-based energy. 

What Is NuScale Technology and Why It Matters

NuScale Technology designs, manufactures, and deploys the only U.S.-regulated SMR available. Its NuScale Power Module can produce 77 megawatts of power, a tiny amount compared to US demand. Still, the NPM can be scaled up with the VOYGR production plant technology, linking up to 12 reactors into a single unit. The reactors are designed for multipurpose use, producing power and using the heat generated for other applications, including desalinization and hydrogen production. NuScale commercializes its products through a partnership with ENTRA1.

NuScale hasn’t produced significant revenue yet but is on track to ramp sales in 2025. A recent deal with Standard Power is only the tip of the iceberg. Standard Power will build two facilities to produce power for its data centers in Pennsylvania and Ohio. Standard Power is a private equity firm focused on data centers and colocation services for cryptocurrency miners, AI, and other high-power computing needs. The plans are for two 12-unit VOYGR plants for a total capacity of 1,848 MWe. 

Sell-Side Lends Support, Headwinds Are Present

Analysts are warming to NuScale in 2024 and may provide a tailwind for the market in Q4 and 2025. Among the most recent reports are initiated coverage from CSLA and Craig Hallum, which peg the stock at Moderate Buy/Buy. However, the consensus target is about 50% below the recent action, and the recent price pop puts the market above the range's high end. Without new revisions, this stock could experience a sharp correction to realign with analysts' sentiment. 

Institutional support is building and provides a tailwind for the market. The caveat is that ownership remains light at 15% of the shares, and quarterly activity slowed as share prices rose in 2024. Short interest is also high, likely to have amplified the upswings and cause for concern. Investors should expect volatility. Because short interest is so high, over 25% at the end of September, the short sellers may be repositioning at the new highs. This stock price could be corrected by 15% to 30% before hitting solid support levels in this scenario. 

The Technical Outlook: NuScale Powers to a New High

The price action in SMR shares is vigorous. The market surged more than 40% following Amazon’s news and could continue to increase on momentum, short-covering, and the bubble named Small Modular Reactors. The market has broken above critical resistance at $16.75, with indicators confirming the move, so the chart has a significant bullish bias. Because the indicators are low in their respective ranges, the market could continue to advance for several more weeks before topping out.