Shares of NuScale Power (NYSE: SMR), a company specializing in small modular reactors (SMRs), surged on Wednesday following news that Amazon (NASDAQ: AMZN) is considering these reactors for its data centers.
The rise in NuScale’s stock was further amplified by a short squeeze, as a notable amount of shares had been sold short. Such news typically prompts short sellers to buy back shares to cover their positions.
As a result, NuScale’s stock reached an all-time high during morning trading, climbing 31.6% by 12:36 p.m. ET. Additionally, the Amazon announcement led to a 7.2% increase in shares of Fluor (NYSE: FLR), a significant investor in NuScale.
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Amazon’s Commitment to Nuclear Energy
On Wednesday, Amazon announced it had signed three agreements related to nuclear energy projects, but it did not disclose any connection to NuScale.
The tech giant expressed its interest in alternative sources of carbon-free energy, including nuclear power, which supports the development of new SMRs. Amazon is also leading a $500 million investment round in X-energy, an alternative energy developer that could compete with NuScale, and it has partnered with Dominion Energy, a Virginia utility, to explore SMR project development.
Although Amazon’s announcement does not directly affect NuScale Power, it is worth noting that NuScale is the only U.S. company with an SMR design license from the Nuclear Regulatory Commission. Last year, NuScale experienced a setback when it had to cancel its first planned SMR project in Idaho.
As of September, 24% of NuScale’s shares were sold short, creating the perfect conditions for a short squeeze on Wednesday, as many investors viewed the news as indicative of a growing momentum for nuclear energy, and specifically SMR deployment. By noon, NuScale’s trading volume had nearly quadrupled its daily average.
What This Means for NuScale Power
Some investors might be reacting prematurely to the news by driving up NuScale’s stock, as the company still faces numerous challenges and has little revenue to show as of now.
Nevertheless, it’s encouraging to see a major player like Amazon recognize nuclear energy, especially after Alphabet made a similar announcement earlier in the week.
Given the competitive nature of the industry, even if SMRs gain traction, there’s no assurance that NuScale will emerge as a frontrunner. As a development-stage company, its stock price is likely to remain volatile and influenced by broader developments in the SMR sector.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, the former CEO of Whole Foods Market, an Amazon subsidiary, is also on the board. Jeremy Bowman holds positions in Amazon. The Motley Fool has positions in and recommends Alphabet and Amazon. The Motley Fool recommends NuScale Power. For detailed disclosure, please refer to The Motley Fool’s policy.
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