Several publications have recently raised concerns about the market scramble to invest in advanced technologies. According to Oilprice: “Billions of dollars are being invested in advanced nuclear technologies, driven by increasing energy demand from AI and broad [US] bipartisan support. Despite significant investment, some Wall Street analysts are concerned about a potential bubble, citing a disconnect between fundamentals and valuations, leading to downgrades for some startups.”
Oilprice notes that billions of dollars are flowing into cutting-edge nuclear technologies, from nuclear fusion experiments to small modular reactors (SMRs) and microreactors that are expected to catalyse a global nuclear power renaissance. “But after years of buzz and successful funding rounds, these Wall Street darlings have yet to send any of their promised carbon-free energy to the grid.”
In 2024, investments in advanced nuclear companies from both private equity and venture capital hit an all-time high, Oilprice notes. According to S&P Global, last year’s investments “surpassed the total deal value of the past 15 years combined.” The push for advanced nuclear energy has accelerated on the back of growing energy demand projections driven by the proliferation of AI data centre projects.
Jackson Morris, director of state power sector policy at the Natural Resources Defense Council, was recently quoted by Marketplace as saying: “The single biggest driver in the paradigm shift we’re seeing right now in the power sector comes down to data centres. Load growth for electricity that we had already forecasted is now coming 10 years sooner and five times as fast because of data centres and these facilities largely being built by the big hyper scalers like Amazon, Google, Microsoft, etc.”
In addition to the AI boost, nuclear energy startups have benefitted from the dwindling support for renewable energy technologies. Currently, nuclear power remains one of very few carbon-free energy sources with broad support globally. In the past few months, Europe has started to loosen restrictions and publicly adopt a more pro-nuclear stance. “However, this confidence is being undercut by some Wall Street analysts, who smell a bubble in the making,” Oilprice commented.
A report in Semafor cited Dimple Gosai, head of US clean tech equity research at Bank of America, as saying that, in general, the hysteria around power demand is pushing the valuations of many newly public energy startups beyond what they will realistically be able to deliver. “The disconnect between fundamentals and valuation is too wide to ignore,” she said. “There’s too much optimism baked into the stock price here.”
According to Semafor, analysts like Gosai “believe the sector is getting a bit too frothy”. The odds of advanced nuclear technology simply not working are low, she believes. “But there are a number of bottlenecks that will make it hard for these companies to fulfil their stated buildout aspirations, including limited supply chains for nuclear fuel and containment vessels, and the familiar red tape for construction permitting and grid interconnection. Data centre companies are also focused above all on speed, she said, a major mark against any kind of nuclear. Nevertheless, she said, more nuclear startup IPOs are likely forthcoming.”
Semafor noted that “Oklo, a small modular reactor (SMR) startup backed by AI bigwig Sam Altman, may prove to be such a cautionary tale.” While the company’s share values have done well since its 2024 IPO, the Bank of America recently downgraded its rating from “buy” to “neutral”. It also downgraded SMR start-up NuScale, from “neutral” to “underperform”. Goldman Sachs recently began tracking of Oklo stock, “giving it a lackluster neutral rating, despite Oklo’s selection this week by the Department of Energy for a new fast-tracking programme”.
However, next-gen nuclear is not necessarily a lost cause. “It still has enormous potential, and will likely be a critical component of the clean energy transition in coming years – but not this year,” Semafor cautioned. The sector must first overcome significant bottlenecks “including limited supply chains for nuclear fuel and containment vessels, and the familiar red tape for construction permitting and grid interconnection”.
Semafor said a host of nuclear startups are drawing billions of dollars in investment even though none are yet producing electricity. “The nascent sector has strong political backing and has made significant progress on core engineering problems. Now, a key question is which specific companies will prove to be a smart play, or a bust, for their investors. With dozens of startups now in the field, some bankruptcies and consolidations are inevitable.” Some, especially in the SMR field, are now making forays into the public market, creating new opportunities and risks for retail investors. “And Wall Street is beginning to cast a wary eye toward some in particular.”
Axios Pro has also begun to report on investors looking to make a hasty exit from the market via SPAC mergers. SPACs, sometimes referred to as “blank check companies” are shell companies with no existing assets or operations at the time that they go public, making them an ideal “escape hatch” for investors getting cold feet about next-gen nuclear startup companies who want to offload the risk elsewhere. “This is the epitome of dumping on retail investors,” a venture funder told Axios Pro.
AtomicBlender, hosted by Michael Seely on YouTube, which aims to be the best source for information and perspective on all things related to nuclear, has also provided a similar analysis. In a recent video: “Are We in a Nuclear Bubble Right Now?” Seely says: “We may be in a nuclear bubble and we need to talk about it…. Industry and to some extent the general public and politicians have convinced themselves of some things that are not entirely true.”
Referring to SMRs, he notes: There is a bit of speculation here because we haven’t seen the factory production of SMRs yet. There have been a lot of proposals but nobody has gone out and build 10 SMRs yet…. It’s theory rather than proven fact.”
