By Paul R. La Monica

OpenAI co-founder and CEO Sam Altman is a busy guy. The man in charge of the company behind ChatGPT is also making a push into the potentially lucrative world of nuclear power.

And Altman's kinetic energy is showing. Oklo, the clean fission/nuclear power start-up that he brought public in May after a merger with his blank-check firm AltC Acquisition Corp, has nearly tripled since mid-September, from about $6.60 a share to just under $20.

But investors should be careful to not believe the hype.

After Oklo went public, the stock tanked. Shares plunged more than 50% on their first day of trading to a little under $8.50.

The stock struggled until last month when Microsoft announced a major deal with nuclear power company Constellation Energy. Microsoft will get power from Constellation's Three Mile Island plant in Pennsylvania, the site of a partial meltdown in 1979.

Since then, Amazon and Alphabet-owned Google have made investments in nuclear reactors. The reason: Microsoft, Amazon, and Google all want to be leaders in artificial-intelligence technology -- and AI requires massive amounts of power.

Constellation and competitor Vistra have soared this year as a result. Vistra is up more than 200%, Constellation has gained 126%. For comparison purposes, AI chip maker Nvidia is up 181%.

So it's clear why Oklo could be considered such an attractive investment. It combines the white-hot trends of AI and nuclear technology with a company backed by AI poster boy Altman, who is Oklo's chairman.

Having Palantir co-founder and chairman Peter Thiel and ARK CEO Cathie Wood as investors doesn't hurt either. Wood's ARK Autonomous Technology & Robotics exchange-traded fund has trimmed its stake, though.

As of last August, Altman himself owned a nearly 2.6% stake in Oklo through his private-equity firm Hydrazine Capital, according to regulatory filings.

"I so believe in the importance of abundant energy. The obvious reason is, of course, AI," Altman said during an investment day presentation for Oklo in February.

To that end, Oklo said in a June regulatory filing that it intends to "sell power to a variety of potential customers, including data centers, national defense, factories, industrial customers, off-grid and rural customers and utilities."

Here's where investors need to have their eyes wide-open. Oklo said "potential customers" because it is still what it describes as a "pre-revenue" company. There aren't any sales yet, though the start-up does have "nonbinding letters of intent."

Names of the potential customers include the Idaho National Laboratory, data-center firm Equinix, and oil company Diamondback Energy.

And, in the risks section of its regulatory filings, Oklo made clear that it hasn't "entered into any definitive agreements with customers for the sale of power or recycling of nuclear fuel" and that it has "no experience in operating a company that builds and operates commercial nuclear power plants or that directly provides customers heat or power."

In other words, it's going to be awhile before Oklo generates sales -- let alone a profit. Oklo reported a net loss of more than $53 million in the first six months of this year. That's on top of a more than $32 million loss in 2023.

So it's clear but it's also worth repeating: Buyer beware. And investors, expect a lot of volatility, too. The stock tumbled more than 10% on Wednesday and is now about 20% below its 52-week high.

Yes, nuclear energy stocks are soaring -- and with good reason. But Oklo, despite the Sam Altman connection, is a highly speculative AI lottery ticket right now.

Write to Paul R. La Monica at paul.lamonica@barrons.com

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October 23, 2024 14:06 ET (18:06 GMT)

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