Key Points
Oklo is a nuclear power start-up looking to build a business around small modular nuclear reactors.
The company is still losing money, which is why a new deal with Meta is so important to understand.
Oklo(NYSE: OKLO) is one of several companies attempting to build small modular nuclear reactors (SMRs). The concept is very attractive, but the proof of concept is actually to build and place an SMR. That hasn't happened just yet. However, Oklo's recent deal with technology giant Meta Platforms(NASDAQ: META) is an important step in the right direction.
What does Oklo do?
Oklo's income statement starts at expenses, so it doesn't really do much of anything as a business right now other than conduct research. It is basically a nuclear power start-up. The goal is to build small modular nuclear reactors.
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SMRs are an exciting technology. The relatively small reactors can be used individually or linked together to create a larger power plant. Their small size and use of the most modern safety protocols should allow them to be placed close to where they are needed, potentially closer to population centers than current large-scale reactors can be. That said, one key benefit of Oklo's technology is that it is designed to use recycled nuclear fuel.
The problem is that Oklo still doesn't have a commercially operating reactor just yet. And there is still a lot of capital investment needed to get to the point where it does. This is where the Meta deal comes in.
The Meta deal is about funding
Technology giant Meta has agreed to "prepay for power" that will be generated at Oklo's Ohio power plant once it is completed. The power will be used by the data centers that Meta operates in the region. However, according to Oklo, "pre-construction and site characterization are slated to begin in 2026." That basically means that the company hasn't even broken ground on the Ohio facility yet.
In fact, Oklo doesn't expect to generate any electricity until 2030. And the full 1.2 gigawatts it has planned won't be up and running until at least 2034. What Meta is really doing with this deal is providing Oklo with the cash it needs to get the project underway. That is very important, because it provides more certainty for the business, but there is still a lot of work to be done before Oklo is a sustainably profitable company.
Only aggressive investors should own Oklo
Oklo's Meta deal is good news that shouldn't be ignored. However, investors still need to take it with a grain of salt. Oklo remains a high-risk investment that is still spending heavily to build its business. Most investors will probably be better off waiting until it hits a few more milestones before investing.
Should you buy stock in Oklo right now?
Before you buy stock in Oklo, consider this:
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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.
