Amazon Invests in the Future of Energy: Exploring Small Modular Reactors

Amazon’s AMZN recent movement into nuclear energy highlights a pivotal moment for the technology. Historically, nuclear energy has been viewed as essential for achieving carbon reduction targets. However, challenges like high costs, lengthy construction times, and safety concerns have hindered its expansion. Today, the emergence of Small Modular Reactor technology (SMR) is transforming the landscape. This innovative approach focuses on smaller, scalable reactors that are more affordable to construct, making it appealing for major tech firms. Companies such as NuScale Power Company SMR are poised to thrive as interest in this industry increases.

Tech giants like Amazon, Microsoft MSFT, and Google GOOGL are adopting SMR technology to power their data centers. These data centers require advanced semiconductors and servers that consume significantly more energy. Recent estimates indicate that the power usage of AI-driven data centers is up to 1.5 times greater than that of previous generations. As the number of data centers rises, so does the technology’s demand. Moreover, SMRs play a vital role in helping corporations meet their carbon neutrality goals while also bolstering the national grid and alleviating reliance on fossil fuels.

Understanding NuScale Technology and Its Importance

NuScale Technology stands out as the sole U.S.-regulated provider of SMRs. Its flagship product, the NuScale Power Module, generates 77 megawatts of power, which appears modest compared to overall U.S. demand. However, this module has the capability to scale up via the VOYGR plant design, allowing up to 12 reactors to function as one unit. These reactors are designed for multiple applications, not only generating electricity but also harnessing heat for processes like desalinization and hydrogen production. NuScale partners with ENTRA1 to bring its products to market.

While NuScale has not yet seen significant revenue, it is gearing up for sales growth by 2025. A recent agreement with Standard Power marks the beginning of this expected upswing. Standard Power plans to establish two facilities in Pennsylvania and Ohio, specifically aimed at supporting its data centers. This agreement could lead to two 12-unit VOYGR plants, with a combined capacity reaching 1,848 MWe.

Market Analysts Show Optimism Amid Challenges

Analysts have grown more positive about NuScale as we move into 2024, which may benefit the stock market in late 2024 and into 2025. Recent coverage from firms like CSLA and Craig Hallum rates the stock as Moderate Buy/Buy. However, consensus estimates suggest the stock’s target is around 50% lower than its recent performance, potentially leading to downward adjustments if no new forecasts are issued. This disconnect raises concerns about a possible correction in the stock price.

Institutional interest is increasing, providing additional support for the stock. Nevertheless, institutional ownership remains modest at 15%, and trading activity has decreased as prices climbed throughout 2024. Additionally, high short interest—exceeding 25% at the end of September—may exacerbate stock price fluctuations. Investors should anticipate potential volatility, as short sellers might adjust their positions in response to recent highs. This could result in a price correction of 15% to 30% before the stock finds stable support.

Technical Analysis: NuScale Reaches New Heights

NuScale’s stock performance reflects a significant upward trend, surging over 40% after Amazon’s announcement. The momentum is expected to sustain, driven by short-covering and growing interest in Small Modular Reactors. The market has surpassed a crucial resistance level at $16.75, with indicators indicating a strong bullish trend. Given that many indicators remain low, there may be room for further advances over the next few weeks before reaching a peak.

This article first appeared on MarketBeat under the title “NuScale Rockets Higher on Amazon Deal: How High Can It Go?”