Oklo Is Down 86% From Its High. Will Shares Soar When Meta's Reactor Comes Online?

Oklo, a company developing small modular reactors (SMRs), has seen its shares plummet by 86% from their peak value. SMRs are touted for their speed of construction and reduced capital requirements compared to traditional nuclear power plants. The increasing demand for energy to support the burgeoning artificial intelligence (AI) industry has drawn significant attention to SMR developers, with Meta Platforms committing to a 1.2 GW SMR system.

However, the commencement of construction for this system is not expected until 2029, and building a sufficient number of data centers to meet the AI demand surge remains a challenge. Despite the strong AI demand, recent AI stocks have experienced a significant downturn due to concerns about the pace and scale of data center construction.

AI's financing remains a concern as hyperscalers continue to increase capital expenditures while experiencing diminishing free cash flow. This situation may lead to a rise in Oklo's cost of capital and potentially result in painful shareholder dilution. The lack of approval from the U.S. Nuclear Regulatory Commission for Oklo's commercial SMR project and the timeline awaiting meaningful updates on their deal with Meta further complicate the outlook for the company.

Given the current market sentiment, delays in Oklo's SMR project are a possibility, adding to the uncertainty surrounding the company's stock price.