Oklo Inc. (NYSE: OKLO) has seen a significant rise of over 70% recently, fueled by the increasing interest from big tech companies in nuclear power solutions, particularly to meet the surging energy demands driven by AI advancements.
The company’s appeal has been bolstered by securing Department of Energy (DOE) approval for its Conceptual Safety Design Report (CSDR) related to the Aurora Fuel Fabrication Facility at Idaho National Laboratory. Despite this rally, potential investors are left wondering if it’s too late to jump in. However, the more important question may be whether Oklo is a sound investment at all.
Oklo’s innovative approach to using recycled nuclear waste to reduce dependency on conventional power grids holds significant promise, especially as tech giants search for sustainable energy sources for their massive data centers. The company’s backers, which include notable figures like OpenAI’s Sam Altman and billionaire Peter Thiel, add to its allure. Yet, there are reasons to be cautious.
Oklo went public in May through a Special Purpose Acquisition Company (SPAC) merger, and history shows that SPACs often experience sharp declines after initial excitement. Renewable energy SPACs, in particular, have underperformed, with an average return of negative 84% over the past 15 years, according to a study from the University of Florida.
Another point of concern is Oklo’s timeline to revenue generation. The company is still in its early stages, and its first operational plant is not expected to come online for at least two to three years.
Oklo is likely to remain a pre-revenue business until at least 2027, raising questions about its financial stability. This long wait for revenue, combined with high capital expenditure needs, could lead to liquidity challenges and the potential dilution of shareholder value as the company seeks more funding.
While Oklo is an exciting player in the nuclear technology sector with a lot of promise, it’s still a highly speculative investment at this stage. Given the risks, many investors might prefer more established nuclear energy companies like Constellation Energy and Dominion Energy, which are already supplying nuclear power to big tech firms. These companies are well-positioned to benefit from the growing demand for sustainable energy solutions without the risks associated with newer, pre-revenue businesses like Oklo.
Despite the risks, Wall Street analysts currently rate Oklo stock as “overweight,” reflecting cautious optimism.
However, they also find the stock fairly valued at around $11 per share, notably lower than its current trading price of $15.60. This suggests that while the stock is experiencing a surge, it may not be sustainable in the long term without significant developments. Investors should weigh these factors carefully before making a decision.
