NuScale Power (NYSE:SMR) has seen a sharp increase in the past few months especially after the Stargate project was announced. Since NuScale is a nuclear energy company, it is in a much better position to power data centers. These data centers need 24/7 uptime and stable power, which nuclear power is perfectly suited for.
However, DeepSeek’s release has completely reversed the gains it got from Stargate, and the stock is currently seeing a decline in the past week. With everything in mind, should you still buy SMR stock, or should you look elsewhere? Let’s take a look.
NuScale Power is a pre-revenue company and generates almost no revenue compared to its valuation. It reported a net loss of $45.5 million in Q3 2024, which included a non-cash expense of $7.2 million related to the fair value of warrants outstanding. NuScale ended Q3 2024 with $161.7 million in cash and equivalents and no debt.
That said, NuScale has reduced its expenses quite a bit in the past few quarters. Operating expenses at $41.2 million in Q3 2024 were much lower than the $93.9 million in Q3 2023. The cash position also crept up during the period since Nuscale issued tens of millions of new shares during the period.
The outstanding share count increased from 76.4 million in Q3 2023 to almost 98 million in Q3 2024.
NuScale’s price-to-book ratio is at over 14 after the rally. The company does have a lot of potential as the global small modular reactor market is expected to double from 2024 to 2032. However, it’s to justify paying so much for a company that is dilutive and has a cash balance that doesn’t provide the runway for it to turn profitable.
Even if you were to be optimistic and assume the current cash balance would allow it to survive for the next three years, it would still have to keep offering shares to stay afloat since analysts don’t expect NuScale to turn profitable anytime soon.
Not only that, the DeepSeek breakthrough has made efficient and low-power AI models much more popular.
The consensus price target of $11.42 also implies 51.4% downside risk, so it is likely too late to buy SMR stock.
