Move over, AI stocks. Nuclear stocks are becoming the next big thing.
Investors have caught on to tech powerhouses like Nvidia that are capitalizing on demand for artificial intelligence (AI) chip components, but the data centers running AI applications like ChatGPT require tremendous amounts of power, and the big question facing investors now is which companies are going to power these "AI factories."
That's the main reason why utilities have been one of the hottest stock market sectors this year, up 28% at recent prices, and Vistra, an unregulated power company, is the top stock on the S&P 500, with gains of 227% through Wednesday's close.
In particular, investors have sharpened their focus on nuclear stocks in the last few weeks as a number of new deals have shown that big tech companies are counting on nuclear power as a source of clean energy to power the AI revolution. Microsoft recently signed an agreement with Constellation Energy to restart the Three Mile Island nuclear plant in Pennsylvania. Alphabet ordered several small nuclear reactors from Kairos Power, and Amazon just signed several agreements for nuclear power.
One little-known nuclear stock capitalizing on the surge is Oklo (NYSE: OKLO), a developer of fission-power plants and a provider of nuclear fuel recycling services. It also has plenty of AI credibility, as OpenAI CEO Sam Altman has been the chairman of the board since 2015, shortly after its founding in 2013.
In the five-day span ending Oct. 21, Oklo shares jumped an incredible 115%, surging in nearly every session during that period, as the chart below shows.
In fact, even after a pullback on Wednesday, the stock was still trading for twice its closing price on Oct. 11.
So why is Oklo suddenly surging? Let's take a look at the scorching-hot nuclear stock first, and then we'll discuss whether it's a buy.
There hasn't been much company-specific news out on Oklo over the past week. The Department of Energy approved its Conceptual Safety Design Report for a fuel-fabrication facility in Idaho. However, that's more of a routine development for the stock.
Instead, the jump in Oklo was driven by the broader interest in the sector sparked by the moves by Amazon and Alphabet, though no company has specifically contracted with Oklo. The reaction is based on the general interest in nuclear energy. Peers like Nuscale Power jumped 34% during that period, and Nano Nuclear Energy was up 39%.
Part of the gains in Oklo shares are likely related to Sam Altman, who owns roughly 6% of the company. Oklo went public in May through a special purpose acquisition company (SPAC) created by Altman, and its performance had been mediocre before last week's breakout.