Why NuScale Power Stock Soared to an All-Time High Today

Shares of NuScale Power (NYSE: SMR), a nuclear energy company that makes small modular reactors (SMRs), were soaring Wednesday on reports that Amazon (NASDAQ: AMZN) is interested in using that type of reactor to meet the energy needs of its data centers.

NuScale surge also seemed to be getting enhanced by a short squeeze, as a significant percentage of the company's stock is sold short. Potentially positive news like this tends to lead to shorts rushing to cover their bets.

As a result, the stock rose to a new all-time high in morning trading, and was up 31.6% as of 12:36 p.m. ET. The Amazon news also sent shares of Fluor (NYSE: FLR), a major investor in NuScale, up by 7.2%.

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Amazon leans into nuclear

Amazon announced Wednesday morning that it had signed three agreements for nuclear energy projects, though it didn't name NuScale as being involved in any of them.

The tech giant said it was interested in additional sources of carbon-free energy like nuclear power, and has signed three new agreements for nuclear energy projects, supporting the construction of new SMRs.

Amazon is also leading a $500 million investment round in X-energy, a privately held alternative energy developer and potential NuScale competitor, and signed an agreement with Dominion Energy, a utility in Virginia, to explore the development of an SMR project.

Amazon's announcement doesn't have direct implications for NuScale Power, but NuScale is the only U.S. company with an SMR design license from the Nuclear Regulatory Commission. NuScale faced a significant setback last year when it had to cancel its first SMR project, planned for a lab in Idaho.

As of the end of September, 24% of NuScale's stock was sold short. That set up Wednesday's short squeeze as investors saw the news as a sign of momentum building for an increase in nuclear power use and the deployment of SMRs specifically. NuScale's trading volume had already nearly quadrupled its daily average before noon.

What this means for NuScale

Investors may be getting ahead of themselves in bidding up NuScale stock, as there are still a lot of hurdles standing in the way of SMRs, and the company itself still has barely any revenue to speak of.

Still, it's promising to see Amazon starting to embrace nuclear, especially after Alphabet made a similar announcement earlier this week.

The industry is highly competitive, and even if SMRs go mainstream, there's no guarantee that NuScale will be a winner. Given that it is a development-stage company, its stock is likely to remain volatile and move on broader news about SMRs.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jeremy Bowman has positions in Amazon. The Motley Fool has positions in and recommends Alphabet and Amazon. The Motley Fool recommends NuScale Power. The Motley Fool has a disclosure policy.