The U.S. Nuclear Buildout Is Complicated. Analysts Ask if Oklo Can Come to the Rescue.

Oklo stock was initiated at Buy at Canaccord Genuity with a $175 price target, marking a Wall-Street high. (OKLO)

Key Points

• Oklo shares have surged 556% this year despite the company not yet deploying its first nuclear powerhouse.
• Canaccord Genuity initiates coverage on Oklo with a Buy rating and a $175 price target, suggesting a 27% upside from its current share price.
• Oklo’s reactor design uses liquid sodium-cooled fast reactors, operating without pressurization, and the company has secured 5 metric tons of HALEU fuel.

Shares of Oklo have surged more than 500% this year and double that amount over the past 12 months. Those gains may raise eyebrows, but it’s time to buy the stock, according to analysts.

Canaccord Genuity initiated coverage on shares of the nuclear start-up with a Buy rating and a Wall Street-high price target of $175. Shares climbed 2.4% to $138 on Tuesday, with the price target suggesting 27% upside.

Of course there’s an artificial-intelligence angle to the firm’s argument. AI is famously power-intensive, and data-center operators are looking for solutions. But concerns about a possible AI bubble are running amok, as stretched valuations within the technology sector draw an increasing amount of scrutiny.

That’s not to mention Oklo’s recent outperformance. The stock has soared 556% this year, even though the company has yet to deploy its first nuclear powerhouse. The benchmark S&P 500, by comparison, has risen just 14.5%.

There’s more to the story than AI, however, the analysts asserted. “The world needs greater supplies of clean, baseload power; while rising AI demand may influence the growth trajectory, we anticipate strong long-term demand for nuclear energy regardless.”

And while a handful of prospective energy providers are trying to leave their mark on the industry, Oklo stands out for several reasons. For starters, the company is “pursuing a tight, vertically integrated approach that appears to bring a more simplified, smaller design ethos to market,” analysts wrote.

Like other firms, Canaccord Genuity is a fan of Oklo’s “build, own, operate” approach to its reactors, which avoids customer responsibility. Crucially, the firm expects Oklo’s reactor buildouts to be financed with debt and supported by investment tax credits, a mix that “could help bolster long-term returns on capital with, potentially, minimal requirements for additional equity.”

Fuel availability remains the biggest lynchpin—not just for Oklo, but for all nuclear companies. Most next-generation reactor designs use high-assay low-enriched uranium, or HALEU.

Despite efforts to accelerate production in the U.S., “the constraints on HALEU availability and its intrinsic cost challenges remain significant and may hinder the deployment of next-generation reactors,” analysts wrote. “And here’s OKLO … to the rescue?”

Oklo has preemptively been awarded 5 metric tons of downblended HALEU by Idaho National Laboratory, while the company also is exploring fresh HALEU sources to be deployed over the longer term.

The reactors themselves are also designed to run on recycled nuclear fuel, targeting concerns about access to fuel sources while also attempting to address concerns about nuclear waste.

Oklo’s liquid sodium-cooled fast reactors use sodium as a heat transfer liquid and coolant, which allows them to operate at high temperatures without being pressurized, unlike conventional reactors.

This design choice allows the company to circumvent “much of the sophisticated set of equipment and specialized materials that are needed to maintain high-pressure operation,” in addition to ensuring safety, analysts wrote.

The analysts expect Oklo to earn approval from the Nuclear Regulatory Commission to operate its first powerhouse sometime over the next 24 months.

The timeline is vague for a reason. Earlier this year, Oklo was named as one of several participants in the U.S. Department of Energy’s Reactor Pilot Program, which aims to have at least three test reactors up and running at national laboratories by July 2026, ahead of Oklo’s own deployment targets of late 2027 or 2028.

Opinions on the stock are divided, with nearly just as many bulls as those on the fence. Of 19 firms tracked by FactSet—Canaccord Genuity included—10 rate Oklo at Buy or the equivalent. Eight rate the stock at Hold, at one at Sell.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com