MW Oklo's and NuScale's stocks have surged on unrealistic expectations, BofA warns

By Emily Bary

While analysts at BofA see justified optimism for nuclear energy over the long run, they're worried that valuations for Oklo and NuScale shares 'leave little room for error'

Small modular reactors, like the one shown in this rendering, have less power-generating capacity than legacy nuclear reactors but are also easier and cheaper to build and deploy.

Some of this year's hottest stocks have been in the nuclear-energy industry, with shares of Oklo Inc. up more than 400% over the course of 2025 to date and shares of NuScale Power Corp. up more than 100%. The stocks are plays on the growing need to power artificial-intelligence ambitions.

But Bank of America analyst Dimple Gosai warns that their valuations currently reflect "unrealistic" assumptions about deployment and discount rates - at least at this point in the adoption of small modular reactors, which have less power-generating capacity than legacy nuclear reactors but are also easier and cheaper to build and deploy.

Gosai is upbeat about nuclear energy in the long run, but she downgraded Oklo's stock (OKLO) to neutral from buy on Tuesday, while also cutting her rating on NuScale's stock (SMR) to underperform from neutral, reflecting her view that "current valuations leave little room for error."

Read: The next battleground in the U.S.-China AI race is nuclear power

At the time Gosai published her note, Oklo's stock was trading at 16.9 times enterprise value to estimated 2032 earnings before interest, taxes, depreciation and amortization. NuScale's was trading at 11.9 times estimates for the metric. All the while, the two had implied discount rates of 10.9% and 6.2%, respectively, "well below" what she sees for the sector on the whole. That means their stock prices bake in an overly bullish deployment trajectory than what's currently in BofA models.

There are other potential risks as well, Gosai noted. "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%."

The stocks are the subjects of much debate on Wall Street, according to Gosai. For example, Oklo operates through a "build-own-operate model," which is more capital-intensive to run but offers more visibility on funding. NuScale, on the other hand, works with Entra1, a company that serves as an investing and operating partner.

The NuScale approach "arguably spreads risk across stakeholders but increases dependence on counterparties," Gosai wrote.

"We prefer Oklo's vertical integration, which can accelerate deployment and de-risk early projects, though we acknowledge that successful adopters in other sectors" - including Tesla Inc. $(TSLA)$ and Bloom Energy Corp. (BE) - "ultimately transitioned from ownership models toward component sales once economics were established," she said. "A similar pivot from Oklo could unlock higher deployment growth funded by lower-cost-of-capital partners."

Shares of NuScale are off 2% in morning action Tuesday, while Oklo's stock is down 3%. Gosai cut her price objective on NuScale's stock to $34 from $38, which was roughly where the stock closed Monday. She lifted her Oklo price objective to $117 from $92, but the new target left little room for upside as Oklo's stock closed Monday just above $116.

See also: Inside the zero-revenue nuclear stock whose 1,500% rally is shaking up the AI trade

-Emily Bary

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

September 30, 2025 12:15 ET (16:15 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.