Shares of small modular nuclear technology provider NuScale Power (NYSE:SMR) have rallied by a whopping 311% year-to-date. While a host of factors are contributing to this rally, further upside in the stock may be limited in the short term.
Multiple Positives for NuScale Power
The current AI boom is driving substantial investments in data centers worldwide, leading to increased energy demand. This trend has brought nuclear energy into the spotlight this year. Another key factor driving interest in nuclear energy is the U.S. Department of Energy’s (DOE) recent announcement of nearly $900 million in aid to accelerate the deployment of small modular nuclear reactors, such as NuScale.
According to the DOE, the U.S. will require an additional 700-900 GW of clean energy to achieve its net-zero emissions goal by 2050. This funding represents a significant push towards developing civil nuclear projects in the country, with SMRs potentially benefiting from this initiative.
A noteworthy development is the recent increase in extraction taxes in Kazakhstan, the largest global uranium producer. These higher taxes may restrict uranium production in the country, potentially benefiting the broader uranium sector in the U.S.
Exercise Caution with SMR
Despite these positives, further gains in NuScale shares may be muted as the stock is now hovering at highs last seen in November 2022. The $15 level could act as a significant resistance for the shares.
What Is the Price Target for SMR?
Wall Street, too, sees a nearly 18.7% potential downside in NuScale, based on an average SMR price target of $11. The consensus rating for the stock is a Moderate Buy at present.
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