Most Traders Have By no means Heard of This Nuclear Inventory Associated to SpaceX. That is About to Change.

The Space Exploration Technologies (SPCX 3.44%) IPO is now behind us. The space stock is now armed with more than $85 billion in fresh capital that it can deploy to fuel growth. Reports also suggest SpaceX could target a $20 billion bond sale this summer, further bolstering its capital firepower.

SpaceX won’t find it difficult to spend its newfound riches. “It’s no secret that SpaceX is a capital-intensive business,” observes a recent research report from Morningstar. Whether it’s building rockets and sending humans to the moon or constructing orbital data centers and launching them into low Earth orbit, SpaceX will be heavily reliant on its IPO proceeds — as well as continued capital raises in the years to come — to realize its growth ambitions.

While SpaceX is diversified, it is not completely vertically integrated. In fact, there’s one constraint to SpaceX’s growth that could derail the growth trajectory of the company’s most valuable business in the long term: artificial intelligence. Thankfully, a nuclear energy stock most investors have never heard of could provide a solution.

This nuclear stock could help SpaceX realize its growth ambitions

According to the SpaceX IPO prospectus, likely the biggest benefactor of the company’s IPO cash will be its AI division. After all, AI alone accounts for more than 90% of the company’s claimed total addressable market. If SpaceX can’t fund growth in its AI division, its IPO valuation may not be justified.

A huge portion of SpaceX’s AI spending will be dedicated to building data centers. The company wants to build several supercomputers that would be among the largest ever built. How to power these facilities, however, is another question.

Image source: Getty Images

So far, SpaceX’s data centers have relied on a variety of fuels, from grid-connected utilities to off-grid solar power and Megapacks — huge energy storage batteries designed and sold by Tesla (TSLA +1.18%). Orbital data centers harnessing solar power in space may eventually solve the energy challenge. But more terrestrial solutions will also be needed.

NuScale Power (SMR +13.73%) designs small modular reactors, which can — at least in theory — be faster, cheaper, and safer to construct than larger conventional nuclear power plants. The SMR industry hopes to get SMR energy systems online within two to three years from the start of construction. Larger nuclear systems, for comparison, often take a decade or more to bring online.

For now, SpaceX seems intent on pursuing orbital data centers. But given the challenges involved, as well as the critical importance of the company’s terrestrial data center build-out for growth, I wouldn’t be surprised to see the company pursue a more diversified approach to its energy needs over the coming years. If SpaceX does move toward nuclear energy to power its data centers, SMR technology would seem like the greatest fit on paper due to its speed of deployment.

With several approved SMR designs, initial modules already under construction, and a measly $4 billion market cap, it’s possible we even see SpaceX acquire an SMR stock like NuScale at some point to accelerate its energy sourcing as quickly and broadly as possible.

Source link