Battle Royale: Oklo vs. NuScale Power. Can Both Make You Rich?

It's a good time to be betting on nuclear energy. According to a recent report published by analysts at Bank of America, nuclear energy is now experiencing a sudden revival. Bank of America calls it a $10 trillion nuclear renaissance.

"[N]uclear energy has, in many ways, been recently 'rediscovered' amid surging electricity demand," the bank's analysts conclude. "Compared with other energy sources, it offers reliable baseload power, a smaller carbon footprint, and a higher energy return on investment."

This is only the tip of the iceberg, however. Why exactly is nuclear being rediscovered? And is this renaissance creating opportunity in nuclear stocks like Oklo (NYSE: OKLO) and NuScale Power (NYSE: SMR)? If so, which stock should you be betting on?

1 reason to expect big things from nuclear energy

The story behind Bank of America's projected $10 trillion nuclear renaissance is actually quite simple.

"Global electricity demand is growing -- with the 2024 International Energy Agency's World Energy Outlook projecting electrification of transport, industry, heating, and technology will require roughly 7,000 additional TWh [terawatt hours] of electricity by 2030," the bank's report notes. "This is more than the annual energy demand of the U.S. and European Union combined."

Rising power needs are a result of rising populations, increases in consumption, and an expansion of the middle class in formerly poorer countries. But these factors have been in play for years, if not decades. The major change to energy demand projections largely comes from one relatively new source: artificial intelligence.

The U.S. is a perfect case study on how AI is reshaping energy demand forecasts. From 1950 to 2005, electricity generation in the U.S. was on a straight incline, driven by the usual suspects of industrialization, rising consumption, and a growing population. The something strange happened. From 2005 to 2020, electricity generation barely budged. Efficiency gains were starting to make a real dent in overall demand.

That flatlining trend, however, may be a thing of the past. Power demand is now expected to rise by around 4% annually from 2024 through 2030. The biggest contributor is the AI industry, whose expansion is driving a $7 trillion buildout of energy-hungry data centers. From 2024 through 2030, data centers are expected to increase their share of U.S. power demand from 4.3% to 11.7%.

In short, a bunch of new power sources will be needed to meet this demand. Nuclear is an ideal solution. It's a climate-friendly option that can produce a large amount of reliable base load. And as we'll see next, a novel form of nuclear energy could be a perfect fit for our new AI-driven energy landscape.

Both Oklo and NuScale Power are promising options

After a sharp correction, the combined market cap of both Oklo and NuScale Power remains under $20 billion. Compared with the supposed $10 trillion nuclear opportunity, there clearly is plenty of potential upside. And these two companies are uniquely positioned to take advantage given their focus on small modular reactors, or SMRs.

Bank of America analysts note five advantages of SMRs over larger conventional nuclear plants:

1. Lower up-front costs.
2. Enhanced safety.
3. Ability to modularize.
4. Smaller footprints.
5. Reduced CO2 output.

These advantages make SMRs particularly good fits for on-site co-location with AI data center infrastructure. This is the business development strategy that Oklo is pursuing. Because SMRs are modular, however, they're also a good fit for large scale utility applications. This is NuScale Power's specific approach.

SMR technology won't scale overnight. Bank of America believes the transition will take a decade or more. It's also not clear which specific approach will win long term: Oklo's more direct approach selling to data center operators, or NuScale Power's utility-scale strategy.

But if you want to bet on companies that will be supplying the AI industry with critical resources -- akin to selling shovels during a gold rush -- SMR stocks such as Oklo and NuScale Power are promising over the long term. Diversifying your bets across both companies gives you two ways to win. If even one of these stocks realizes its full potential, the combined position should pay off handsomely.

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.