NuScale Power's Valuation and Growth Prospects Amid AI Energy Shifts

The intersection of artificial intelligence (AI) and energy infrastructure is reshaping investment dynamics in unexpected ways. NuScale Power (NYSE: SMR), a pioneer in small modular reactors (SMRs), finds itself at the center of this transformation. Recent developments-including Meta's potential partnership with Alphabet, UBS's price target cut, and NuScale's Q3 2025 financial results-highlight a stock caught between the promise of AI-driven energy demand and the harsh realities of commercialization delays and financial underperformance.

AI Efficiency and the Energy Equation

Meta's reported interest in Alphabet's tensor processing units (TPUs) underscores a broader industry shift toward optimizing AI hardware efficiency. By diversifying its chip suppliers, Meta aims to reduce costs and improve performance for AI workloads like content moderation and user experience enhancements according to reports. While this collaboration could challenge Nvidia's dominance in AI accelerators, it also raises a critical question: Will advancements in chip efficiency curtail the energy appetite of AI data centers?

According to a report, SMRs are increasingly viewed as a solution to meet surging energy demands from AI and large language models (LLMs), particularly for data centers. However, the same study notes that the success of SMRs hinges on regulatory reforms, technological maturity, and public acceptance. If AI hardware efficiency gains outpace energy consumption growth, the urgency for SMRs like NuScale's could wane. Conversely, if AI's energy demands continue to outstrip efficiency improvements, SMRs may remain a critical component of the energy mix.

NuScale's Financial Headwinds and UBS's Skepticism

NuScale's Q3 2025 results painted a grim picture. The company reported a $1.85-per-share loss-far exceeding the expected $0.13-and revenue of $8.24 million, below the $11.55 million forecast. UBS responded by slashing its price target to $20 from $38, citing delays in the RoPower project's final investment decision, rising operational costs, and the need for new equity funding to meet milestone payments. The firm also adjusted its valuation model to 16x 2028E EV/cash EBITDA, aligning with nuclear-exposed peers but reflecting a more conservative outlook.

These results highlight a key tension: NuScale's strategic relevance to AI-driven energy demand versus its operational and financial challenges. While the company's SMRs are certified by the U.S. Nuclear Regulatory Commission and positioned ahead of competitors like Oklo, its path to profitability remains fraught. Operating expenses surged 1,213.5% year-over-year in Q3, leading to a $538.44 million operating loss.

The AI-Driven Energy Landscape: Opportunity or Overreaction?

NuScale's stock has surged over 200% in the past quarter, driven by regulatory milestones and the U.S.-Japan Framework Agreement, which mobilizes up to $550 billion in investment for advanced nuclear technology. This agreement underscores the strategic importance of SMRs in supporting U.S. energy independence and reindustrialization, including AI infrastructure. However, insider trading activity-71 sales in six months-and mixed analyst ratings suggest market uncertainty.

The key question is whether NuScale's valuation reflects realistic expectations or an overreaction to AI trends. On one hand, AI data centers are projected to consume 3% of global electricity by 2030 according to a study, creating a long-term tailwind for SMRs. On the other, advancements in AI hardware efficiency, such as TPUs, could reduce energy intensity per computation, potentially softening demand. The Edge AI Software Market report, for instance, emphasizes real-time data processing but does not address energy consumption trends in traditional data centers according to a report, leaving a gap in understanding how efficiency gains might offset growth.

Conclusion: A Stock at a Crossroads

NuScale Power's valuation and growth prospects hinge on two competing narratives. The first is a bullish scenario where AI's energy demands outpace efficiency gains, cementing SMRs as a cornerstone of clean, distributed power. The second is a bearish scenario where hardware innovations reduce energy consumption, diminishing the urgency for SMRs and exposing NuScale's financial vulnerabilities.

UBS's price target cut and NuScale's Q3 results suggest the market is leaning toward the latter, at least in the near term. However, the U.S.-Japan Framework Agreement and NuScale's regulatory lead indicate that the company remains a key player in a sector poised for long-term growth. For investors, the challenge lies in balancing optimism about AI's energy needs with skepticism about NuScale's ability to execute its commercial plans.

In the end, NuScale's stock may be overreacting to AI efficiency trends-or it may be losing relevance. The answer will depend on whether the company can stabilize its finances and deliver on its SMR roadmap before the energy landscape shifts irreversibly.