As artificial intelligence (AI) technologies continue to grow, the need for consistent, reliable energy to support this expansion is also increasing. President Trump’s recently signed executive order and announcement of Project Stargate, a private sector investment of up to $500 billion to fund infrastructure for artificial intelligence, suggests this demand is only accelerating. Companies are turning to new energy sources, primarily nuclear, to address this evolving requirement. One company leading this shift toward nuclear energy is Oklo (OKLO), which has ambitious plans to build and operate Small Modular Reactors (SMRs) to provide data centers with the power they need to drive the AI revolution.
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Oklo has recently signed several agreements to power data centers and other operations with its groundbreaking Aurora microreactors. It is a compelling option for investors interested in riding this technological tidal wave.
Making Strides Toward SMRs
Oklo designs and develops fission power plants to provide commercial-scale energy to U.S. customers. The company also offers used nuclear fuel recycling services. Oklo’s innovation lies in small modular reactors (SMRs), a concept that could revolutionize how reactors are built and operated. Its microreactor, Aurora, occupies only two acres of land and doesn’t need water for cooling, a deviation from the norm in nuclear reactor design.
Oklo has secured a unique position as the only advanced fission company with a site use permit from the Department of Energy. However, before Aurora can launch, it still needs approval from the Nuclear Regulatory Commission (NRC). The company is optimistic about receiving this within the next three years, promising a significant cost reduction and effective use of existing supply chains.
Oklo’s Strategic Collaborations
Lightbridge (LTBR) and Oklo recently announced they have signed a memorandum of understanding to explore opportunities for reprocessing and recycling spent uranium-zirconium fuel. This partnership could lead to advancements in the nuclear fuel sector as demand from energy-intensive industries like artificial intelligence and cloud computing grows. Outside of the collaboration with Lightbridge, Oklo is collaborating with RPower (NSE:RPOWER) to implement a phased power model for data centers, combining RPower’s natural gas generators with Oklo’s Aurora power systems.
Along with these initiatives, Oklo recently finalized the largest corporate power agreement in history with data center operator Switch, highlighting the increasing demand for nuclear energy. Oklo plans to build its small modular reactors by 2044 to supply power to Switch’s data centers. This announcement follows Oklo’s signing of non-binding letters of intent in April with Diamondback Energy and in May with Wyoming Hyperscale, seeking potential 20-year power purchase agreements.
Several Years of Cash Burn Available
Through the end of Q3 2024, Oklo’s year-to-date operational expenditures total $24.9 million, consisting of a $63.3 million net loss and a $2.2 million increase in working capital, primarily due to reduced accounts payable. This loss was partly offset by $40.7 million in non-cash impacts, including a unique fair market value adjustment of $7.8 million related to earnout shares payable to Oklo staff. As a result, Oklo’s year-to-date operating loss has reached $37.4 million. For 2024, Oklo projects an operational loss between $40 million and $50 million, consistent with earlier expectations.
As of the end of the third quarter, Oklo’s cash and marketable security reserves amounted to $288.5 million, made up of $91.8 million in cash and equivalents and $196.7 million in marketable securities. This should give the company several years of cash burn as it pursues bringing SMRs online and operational.
Analysts Are Constructive
The stock has surged, climbing over 271% in the past year. It trades near the upper end of its 52-week price range of $5.35 – $43.70 and shows ongoing positive price momentum as it trades above the 20-day (28.25) and 200-day (15.92) moving averages.
Analysts following the company have been constructive on OKLO stock. For example, Wedbush analyst Daniel Ives, a four-star analyst according to Tipranks’ ratings, recently reiterated an Outperform rating on the shares and raised the price target to $45 (from $26), noting the AI Revolution buildout is increasing under the Trump Administration, and Oklo is set to be a major player.
Based on the recent recommendations of two analysts, Oklo is rated a moderate buy overall. The average price target for OKLO stock is $38.00, representing a potential downside of -9.13% from current levels.
OKLO in Review
Oklo is poised to become a significant player in the AI-driven demand for robust energy. The company’s innovative microreactor, Aurora, offers a groundbreaking solution for powering data centers, and this unique approach has secured them a distinct position in the market as the only advanced fission company with an existing site use permit from the Department of Energy. As demand for AI and cloud computing continues to rise, partnerships like those with Lightbridge and RPower will likely pave the way for nuclear advancements, ensuring a steady energy supply for data centers.
Despite being in its early stages and forecasting operational losses, Oklo’s existing cash reserves highlight its stability. Analysts are consistently optimistic about Oklo’s prospects, making the company’s innovation and ambition undeniably compelling for investors looking to ride the AI tidal wave.
