After Microsoft’s landmark deal with Constellation Energy, could this little-known stock be the next big opportunity in nuclear power?

Data centers house IT architecture, such as racks of servers that store advanced chipsets called graphics processing units (GPUs) — a critical piece of infrastructure for AI development.

One disadvantage of data centers, however, is energy consumption. Because GPUs run sophisticated algorithms around the clock, data centers experience high levels of heat and consume a lot of energy. Today, some of the most common data center equipment includes air conditioning units, fans, and generators.

While these products work, there are questions about their long-term viability. For this reason, nuclear energy appears as an alternative and more efficient solution to traditional data center energy solutions.

Just a few weeks ago, Microsoft signed an agreement with Constellation Energyand the two companies are looking to restart the Three Mile Island nuclear power plants in Pennsylvania. Constellation shares rose on news of the partnership. Of course, investors are now looking for the next big opportunity at the intersection of artificial intelligence and nuclear power.

Below, I will explore a little-known nuclear power company called OK (OK 18.92%) and evaluate whether the stock could be a profitable opportunity.

What is Oklo?

According to its website, Oklo is a “nuclear fuel fission and recycling technology company.” Its core project is called the Aurora plant, which is essentially a fission reactor that harnesses recycled nuclear waste. This technology could revolutionize data center operations, making them less dependent on traditional power grids.

Image source: Oklo Investor Relations.

Oklo looks impressive on the surface, but…

Before going public, Oklo received funding from a number of high-profile venture capital firms. Its top investors include OpenAI CEO Sam Altman and Silicon Valley billionaire legend Peter Thiel. Furthermore, the company has received interest in its reactors from people like Diamondback Energy, Equinix, Center Energy and the United States Air Force.

On the surface, Oklo looks pretty impressive. But smart investors know there’s always more to discover when evaluating smaller businesses. Oklo is no exception, and we found a few important things to consider with this under-the-radar power stock.

Image source: Getty Images.

…investors should consider the following

Oklo began trading on the New York Stock Exchange in May after merging with a special purpose acquisition company (SPAC). SPACs are a somewhat unusual way to go public because they bypass traditional investment bank underwriting processes. In the past couple of years, SPACs have grown in popularity.

Here’s the uncomfortable reality of SPAC stocks. Many market themselves as cutting edge businesses but have yet to deliver tangible results. As a result, after an initial surge fueled by investor euphoria, SPAC stock often ends up selling off as a more sober valuation settles in.

According to a study from the University of Florida, renewable energy SPACs have an average return of negative 84% between 2009 and 2024. It’s too early to tell where Oklo’s stock price will end up, but I see several reasons why the stock could start to fall.

While the Aurora plant has some appeal, Oklo’s first plant isn’t expected to be operational until 2027. Until then, the company will likely remain a pre-revenue business that requires continued investment in capital expenditures (capex). As a result, I wouldn’t be surprised to see the company pressed for liquidity and potentially shareholder dilution in an effort to keep the operation afloat.

I find Oklo’s nuclear solutions intriguing, but I have my doubts about how investable the business is at this stage. For now, I see Oklo as quite risky and a speculative opportunity at best.

I think the more prudent strategy is to invest in higher quality businesses that are already making moves at the intersection of nuclear and AI. In addition to Microsoft and Constellation Energy, Amazon and Vistra there are some big names worth keeping an eye on. As for Oklo, I think it’s best to sit on the sidelines and monitor the company’s progress over time.