Key Points
Nuclear energy remains a promising long-term growth story.
Companies developing small modular reactors in particular will need one key catalyst to materialize.
2026 has been a rough year for many nuclear energy stocks, but it has been particularly painful for companies specializing in small modular reactors (SMRs).
NuScale Power (NYSE: SMR), for example, has seen its share price decline by 48% this year. Oklo (NYSE: OKLO), another SMR developer, has lost 51% of its value since the start of 2026.
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You might understandably find it strange that nuclear stocks are falling even as demand for the energy supplies they promise to offer continues to rise. A Bank of America Institute report predicts that nuclear energy will be a $10 trillion opportunity over the next two-and-a-half decades as AI companies desperately search for new power sources for their massive and electricity-hungry data centers.
"Amid surging electricity demand, driven in part by the rise in AI/data centers, nuclear energy offers a potential solution," the report observes. "Compared with other energy sources, it offers reliable baseload power, a smaller carbon footprint, and a higher energy return on investment."
Bank of America researchers are particularly excited about small modular reactors, which can -- at least in principle -- be built faster and with lower upfront costs than traditional nuclear plants, making them a better fit for meeting the AI industry's near-term demand for more power.
"[N]ew advancements in technology may now make the tipping point in sight for small modular reactors to reshape nuclear energy supply chains over the next decade," the bank claims. "[I]n the context of energy demand, advancements in technology like SMRs could likely reshape nuclear power supply chains over the next decade, given the major benefits over conventional power plants."
Why, then, have the stock prices of NuScale and Oklo essentially been cut in half this year? Because the small modular reactor industry is still waiting for one key catalyst to arrive. After this catalyst hits, you can expect the market to rerate SMR stocks sharply higher.
This catalyst will reshape the nuclear and SMR industries
The SMR industry looks promising on paper. But it's important to remember that only two such systems have ever been successfully deployed -- one in China, the other in Russia. Both of those systems are relatively small. More than 80 SMR projects are currently in some stage of development. But it's not clear how many of those will ever be built. A large portion of them still lack clear funding sources.
Image source: Getty Images
This is what the market is largely worried about right now: that the hype about small modular reactors will never translate into their large-scale, real-world adoption. We've already seen major project cancellations in previous hype cycles.
In 2023, for example, NuScale's largest deal was terminated by the project's customers.
"Although there were problems specific to the Utah Associated Municipal Power Systems project, the financial challenges and cost trends witnessed in that case will afflict any SMR project," warned one industry analyst at the time. "This was a death foretold; the red flags have been obvious for years now. Although there were problems specific to that project, the financial challenges and cost trends witnessed in this case will afflict any small modular nuclear reactor project. In a rational world, no utility or government would invest another dime on these theoretical reactor concepts. "
Right now, NuScale lacks firm financial commitments from the customers that make up its business backlog. While some of Oklo's customers have pledged fractions of capital, most of its deals remain non-binding.
Will non-binding deals translate into real-world adoption? This is the catalyst the SMR industry is still waiting for.
The good news is that such a catalyst could soon be on the way. NuScale's CFO said the company is hoping to close a power purchase agreement (PPA) deal soon with its largest customer, the Tennessee Valley Authority, potentially by the end of 2026. A PPA would essentially commit the customer to paying for the project's power production, clearing the way for construction to begin. If built, the planned 6-gigawatt facility would be the largest SMR deployment in the world by far.
NuScale has let down investors before. So a signed PPA this year is far from a guarantee. But this is exactly what the market is looking to see: Can Oklo or NuScale get the customers in its pipeline to commit financially long term and at scale? Confirmation that they can is the catalyst the market is waiting for.
Bank of America is an advertising partner of Motley Fool Money. Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.