Nuclear Power Stocks Down Following Federal Funding Cuts Proposal
Nuclear power stocks began the post-holiday week on a negative note. Shares of Oklo (NYSE: OKLO) slumped by 6.3% as of 10:45 a.m. ET, while Constellation Energy (NASDAQ: CEG) saw a decline of 6.5%. Nano Nuclear Energy (NASDAQ: NNE) experienced the sharpest drop, falling 10.8%. The hydrogen power sector faced similar challenges, with Plug Power (NASDAQ: PLUG) decreasing by 11.8%.
Federal Funding Cuts Spark Investor Concerns
The cause of this downward trend can be traced back to a report from The Wall Street Journal on Thursday, indicating that the U.S. Department of Energy is considering significant cuts, amounting to nearly $10 billion, to federal funding for clean-energy projects.
According to the report, these proposed cuts stem from the Elon Musk-led Department of Government Efficiency, targeting a wide range of programs, including hydrogen, carbon capture, energy storage, and possibly nuclear energy. There are concerns that thousands of jobs linked to these programs within the Department of Energy could be at risk. However, the Department of Energy has stated, “no final decisions have been made, and multiple plans are still being considered.” This response mirrors earlier comments regarding similar funding proposals.
As discussions about potential funding reductions persist, the prospect of losing up to $10 billion in federal support understandably raises alarm among investors.
Image source: Getty Images.
Nuclear Energy’s Potential Amidst Uncertainty
Despite the worrying news, investors should remain calm. As noted by the WSJ, one of the few clean-energy initiatives that has received funding from the Biden-era Inflation Reduction Act is a nuclear project: the Palisades nuclear plant restart in Michigan. This suggests some governmental support for nuclear projects, contrasting with the more vocal opposition to other clean-energy programs, such as wind energy.
While there are concerns, it is noteworthy that industry experts predicted a potential “renaissance” for the nuclear sector under the current administration as recently as February. Until more concrete details emerge on which programs might see funding cuts, nuclear power stocks may still hold value.
Evaluating Nuclear Stock Investment Opportunities
Investors looking at nuclear energy stocks should consider their options carefully. Not all nuclear-related companies are equal in terms of risk. For example, Constellation Energy, with a trailing net profit of $3.7 billion, offers a lower-risk investment compared to Oklo or Nano Nuclear Energy, both of which are not currently profitable. Analysts estimate that Oklo may not see profitability until 2029, while Nano Nuclear Energy could take until 2031, according to forecasts from S&P Global Market Intelligence.
Constellation Energy trades at 17.5 times its earnings, projecting less than 7% annual earnings growth over the next five years, coupled with a dividend yield of under 1%. While it does not stand out as an exciting investment, Constellation Energy may be a safer choice for those interested in a nuclear future.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Constellation Energy. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
