Nuclear-energy Oklo stock looks to cash in on AI boom, but there's catch

Nuclear energy isn’t the first thing that comes to mind when people think of artificial intelligence, but there’s a reason energy stocks surged alongside AI stocks over the past year.

Simply put, AI models demand an enormous amount of electricity.

That’s where energy company Oklo (OKLO)—which is up 33% this year—comes in. In short, Oklo is looking to harness nuclear power to capitalize on AI’s growing appetite for power.

Backed by OpenAI’s Sam Altman, the Santa Clara, Calif.-based company designs and develops fast fission reactors that maximize uranium use while delivering reliable, clean, commercial-scale energy.

Beyond Altman’s investment, tech giants Microsoft (MSFT), Amazon (AMZN), and Alphabet (GOOG) have also poured money into nuclear power.

Oklo’s flagship project, the Aurora powerhouse, is an advanced nuclear fission plant. The company joined a U.S. Department of Energy program aimed at fast-tracking its development, with plans to bring Aurora online by the end of 2027.

Oklo is already securing major deals.

In December, it struck a deal to supply nuclear power to data center operator Switch—one of the largest corporate power deals in history. In January, Oklo also signed a memorandum of understanding with Texas-based RPower to deploy a phased energy model for data centers.

Regulatory hurdles Loom

Despite its rapid rise, Oklo and other nuclear firms face potential regulatory roadblocks that could slow expansion.

Oklo isn’t generating revenue yet, as it’s still in the development phase. Investor interest in OKLO and other nuclear stocks is largely tied to future demand from AI-driven data centers.

But regulators in key U.S. power markets are raising concerns. As nuclear plants divert power from regional grids, they risk reducing reliability and driving up consumer costs, according to The Wall Street Journal.

That scrutiny could shift investor sentiment away from nuclear stocks like OKLO and toward gas companies such as NRG Energy (NRG), which can build gas-powered plants much faster.

Morgan Stanley equity analyst Stephen Byrd notes that speed is critical for AI companies racing to power their data centers, making quicker gas solutions more appealing in the short term.

Industry experts don’t expect these hurdles to derail nuclear energy’s growth, but they could delay revenue opportunities as the regulatory process plays out.

One potential advantage for Oklo? Chris Wright, a former board member, now serves as Secretary of Energy in the Trump administration. Oklo will report its fiscal 2024 earnings on March 25.