Oklo (NYSE:OKLO) -3.8% and NuScale Power (NYSE:SMR) -3.9% in Tuesday’s trading as Bank of America downgraded the two nuclear names to Neutral and Underperform, respectively, saying valuations “now embed deployment ramps and discount rates we view as unrealistic” in the current early stage of small modular reactor adoption.
BofA analysts Dimple Gosai and Christopher Souther said reverse DCFs using the bank’s 14% discount rate imply 15.5 GW for Oklo (NYSE:OKLO) and 34.7 GW for NuScale (NYSE:SMR) by 2040, a respective 44% and 92% above each company’s base case forecast.
While remaining positive on the long-term nuclear theme, the analysts believe current valuations leave little room for error and the near-term risk/reward skews negative, adding that cycle markers suggest the AI trade “may be entering later stages: retail participation is elevated, active ownership is just 1%-2% for both stocks, and passive ownership stands at 15%-20%.”
Oklo (OKLO) bulls highlight its political backing and vertically integrated build-own-operate model, which could capture more value through ~$120/MWh PPAs and ~25% IRRs, but bears stress this approach is capital intensive and question management’s ~$3,000/kW FOAK cost target vs. Ontario’s ~$15,000/kW builds, Gosai and Souther said.
NuScale’s (SMR) commercialization strategy relies on ENTRA1 as partner, backed by NRC design approval, ~$1 billion Deepartment of Energy support, ITC eligibility, and its modular “12 pack” design; bulls argue this offers siting flexibility and staged capex, but bears see the company as a “downsized AP1000 with weaker $/kW economics, rising supply chain costs, and credibility risk if no firm projects emerge,” adding that ENTRA1’s 30 GW pipeline is non-binding, its balance sheet and nuclear track record remain untested, and Fluor’s reduced stake raises further concerns about sponsor commitment.