Small Modular Reactors: Timing the Clean Energy Transition and NuScale's Strategic Edge

The clean energy transition is accelerating, and nowhere is this more evident than in the small modular reactor (SMR) sector. As governments and industries race to decarbonize, SMRs—compact, scalable nuclear reactors—are emerging as a critical piece of the puzzle. Two key players in this space, NuScale Power (SMR) and BWXT (BWXT), are vying for leadership, but their approaches and risk profiles differ starkly. For investors, the question is not just about which company is winning the SMR race, but when to act and how to balance innovation with valuation realism.

NuScale's Surge: Regulatory Wins and Strategic Flexibility

NuScale Power has been a standout in 2025, with its stock surging 206% in the past quarter. This meteoric rise is driven by a perfect storm of regulatory progress, strategic partnerships, and a compelling vision for SMR commercialization. The company's uprated 77 MWe design received U.S. Nuclear Regulatory Commission (NRC) approval in July 2025, a milestone that positions it as the only U.S. SMR developer with two NRC-certified designs. This regulatory edge is critical, as it accelerates NuScale's path to deployment by 2030 and differentiates it from competitors still navigating the approval process.

NuScale's strategic partnerships are equally compelling. Its exclusive global collaboration with ENTRA1 Energy to commercialize SMRs and its work with the Department of Energy's Pacific Northwest National Laboratory on hydrogen production from desalination brine highlight its ability to diversify revenue streams. These initiatives aren't just theoretical—NuScale has already demonstrated a hydrogen production simulator and is targeting industrial-scale applications exceeding 200 metric tons per day. Such innovation positions the company to tap into the $8.37 billion global SMR market by 2032, which is projected to grow at a 4.98% CAGR.

However, the stock's recent surge has pushed it to $51.67, well above the $37.93 consensus price target. While NuScale's long-term potential is undeniable, investors must weigh the current valuation premium against its lack of profitability. The company anticipates losses through 2027, and its upcoming August 7 earnings report will be pivotal. A positive update on its RoPower project in Romania (which could secure six SMRs for a 462 MWe plant) or progress in discussions with U.S. data center operators could justify the premium. A miss, however, might trigger a correction.

BWXT's Strengths: Government Contracts and Operational Depth

BWXT, on the other hand, is a more traditional player with a $4.87 billion backlog and deep expertise in defense and nuclear infrastructure. Its $1.3 billion contract to manage Canadian Nuclear Laboratories and its $2.6 billion U.S. Naval Nuclear Propulsion Program contracts provide immediate revenue visibility. BWXT's recent acquisition of Kinectrics, Inc. in May 2025 further bolsters its capabilities in SMR projects, commercial plant services, and advanced nuclear technologies.

BWXT's Q1 2025 results underscore its financial stability: 13% revenue growth to $682 million, 20% non-GAAP EPS increase to $0.91, and $17 million in free cash flow. These metrics, combined with its $3.40–$3.55 non-GAAP EPS guidance for 2025, make it a more conservative bet in the SMR space. The company is also investing in long-term innovation, such as its Lynchburg Innovation Campus, which focuses on advanced nuclear R&D.

BWXT's competitive edge lies in its government-driven backlog and ability to scale. While NuScale is betting on commercial SMR deployments, BWXT is leveraging its defense and energy partnerships to sustain growth. This diversification reduces its exposure to the slower-moving SMR market, making it a safer play for investors seeking near-term cash flow.

Regulatory Progress: The X-Factor in the SMR Race

Regulatory progress is the linchpin for both companies. NuScale's NRC approvals give it a first-mover advantage, but BWXT's $550–$570 million adjusted EBITDA guidance and $5.81 billion 2024 SMR market value suggest it can catch up if SMR adoption accelerates. The NRC's timeline for approving other SMR designs, such as those from Holtec International or Rolls-Royce, could also dilute NuScale's competitive edge.

For investors, the July 2025 NRC approval of NuScale's uprated design is a critical catalyst. If the company secures its RoPower contract and gains traction with U.S. customers (including hyperscale data centers), its valuation premium could be justified. However, BWXT's government contracts and operational depth offer a more predictable path to growth, especially in a market where deployment timelines remain uncertain.

Market Sentiment and Timing the Transition

The SMR sector is riding a wave of optimism, but timing is everything. NuScale's 2030 deployment target means investors must tolerate long lead times and high capital intensity. By contrast, BWXT's defense contracts provide immediate revenue, making it a more attractive short- to mid-term play.

For those with a longer time horizon, NuScale's hydrogen and desalination innovations could unlock value in the $1.2 trillion global hydrogen market and $12 billion desalination industry. However, the stock's current premium requires caution. If NuScale's August 7 earnings report confirms $13.4 million in Q2 revenue (up from $1.4 million in 2024) and $42.3 million in operating expenses, it could signal disciplined cost management and investor confidence. A miss, however, might trigger a re-rating toward its $37.93 price target.

Conclusion: Balancing Innovation and Realism

The SMR sector is a high-conviction play in the clean energy transition, but investors must weigh NuScale's innovation and regulatory momentum against BWXT's operational stability and government ties. NuScale is the long-term winner if SMR adoption accelerates and its hydrogen/desalination projects scale, but its current valuation demands a high tolerance for risk. BWXT, meanwhile, offers a more balanced approach for investors seeking steady cash flow and diversified exposure to nuclear energy.

For those who believe the clean energy transition is inevitable, a position in both companies could make sense. NuScale for the upside in SMR commercialization and BWXT for the stability of defense and energy contracts. But for now, the market is betting big on NuScale's vision—and that bet is being priced into its stock. Whether it pays off will depend on the pace of regulatory approvals, the success of its Romanian project, and the broader adoption of SMRs in the next few years.