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Key Takeaways

• Oklo Inc. soared 100% in a month as the nuclear energy stock has benefited from the AI-driven energy boom.
• Rolls-Royce may provide stability mixed with blockbuster nuclear potential.
• Rolls-Royce stock has soared 1,700 in three years, yet it has been trading 23% below its average price target.

Oklo Inc. (OKLO - Free Report) stock has soared nearly 100% in a month as the home-run next-generation nuclear energy company benefits from the artificial intelligence-driven energy boom. AI hyperscalers and the U.S. government are spurring a nuclear energy revival to help fuel AI expansion, which is sending energy demand skyrocketing.

Wall Street recognizes that nuclear energy is a critical part of the broader AI trade and the growing energy and infrastructure spending boom. Oklo appears to be a long-term nuclear energy winner.

However, Oklo is potentially overheated following its recent surge (including a +20% rally on Friday morning). Oklo has been trading at its most overbought RSI levels of the past 12 months and miles above its 50-day moving average. Plus, the Sam Altman-backed nuclear energy company is pre-revenue.

Investors who don’t want to chase Oklo now but still want to buy into the next-generation nuclear energy industry and its AI-boosted home run upside should look no further than Zacks Rank #3 (Hold) rated Rolls-Royce (RYCEY - Free Report).
 

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Rolls-Royce provides investors with the stability of a diversified industrial giant, mixed with the blockbuster potential of next-gen nuclear. It is utilizing its decades of expertise in nuclear propulsion systems for submarines to build cutting-edge small modular nuclear reactors (SMRs).

Rolls-Royce stock skyrocketed 1,700% in the past three years as Wall Street fell in love with the once-beaten-down industrial titan because its new CEO, who officially took over in January 2023, is focused on profits, streamlined growth, and the future.

Rolls-Royce reached several of its lofty financial goals faster than it originally anticipated. Additionally, it reinstated its dividend earlier this year and announced buybacks.

Despite its climb, the stock has recently been trading 23% below its average Zacks price target at around $15.70 a share, and it may be ready for a potential breakout. Oklo has been trading at around $135 per share, which might make Rolls-Royce even more appealing to some investors.
 

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A Quick AI-Boosted Nuclear Energy Bull Case

There won’t be an AI age unless the U.S. and the world spend trillions of dollars expanding energy generation capacity and the grid, because AI marks a paradigm shift for energy demand.

Generative AI platforms like Chat GPT use 10x the energy of an average Google search, while large data centers consume as much electricity as a midsize city. U.S. electricity demand is set to grow by ~75% by 2050.

This backdrop is why the U.S. government is aiming to quadruple nuclear energy capacity by 2050. The U.S. and the UK entered a strategic nuclear energy and AI partnership earlier this week. Furthermore, all of AI hyperscalers from Amazon to Meta have made blockbuster nuclear power deals and are actively supporting SMR development.

In short, nuclear energy has the potential to power the AI arms race and the broader economy.

Why Rolls-Royce is a Must-Buy Nuclear Energy Stock

The historic engine maker is as close to a surefire winner as there can be in the next-gen small modular nuclear reactor (SMR) space. The London-based company landed a potentially game-changing nuclear energy deal with the British government in June to build SMRs, beating out several others for the first-of-its-kind contract.

Rolls-Royce is also crucially a multinational aerospace and defense powerhouse. It is not a pure-play speculative bet on SMRs that haven’t even been built.

It’s not a stretch to say that investors should have a bit more confidence that Rolls-Royce, which has built cutting-edge aircraft engines and nuclear propulsion systems for submarines for decades, is more likely to be a winner in next-gen nuclear power than some of its pre-revenue upstart competitors.
 

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​​​​​​​Rolls-Royce is working with Great British Nuclear to build its first three small modular reactors by the 2030s, with GBP2.5 billion of funding pledged through 2029 and billions more expected once construction begins.

On top of that, Rolls-Royce SMR was named in late 2024 as the preferred supplier for SMR construction by the Czech Republic.

Rolls-Royce's Bullish Financials and Growth Outlook

Former oil industry executive Tufan Erginbilgic took over Rolls-Royce in January 2023, with a clear goal of boosting profitability and revamping the entire company after a disappointing decade.

Rolls-Royce reported blockbuster 2024 results and boosted its guidance, noting it was well ahead of its goal of quadrupling profits by the end of 2028. It also reinstated dividends and announced a GBP1 billion share buyback program. 

Rolls-Royce is projected to grow its adjusted earnings per share (EPS) by 50% in FY25 and 17% in FY26 to reach $0.45 a share next year, up from $0.26 in 2024.

The company’s earnings outlook has surged over the last few years, helping drive the stock's rally. Its recent positive EPS revisions help it earn its Zacks Rank #3 (Hold) rating.

Buy the Nuclear Energy Stock Now Before a Breakout

Rolls-Royce stock has skyrocketed 1,700% in the past three years, including a 120% jump in the trailing 12 months. Despite its market-crushing performance, it still has been seen trading roughly 26% below its late 2013/early 2014 highs and 23% below its average Zacks price target at $15.70 a share.
 

Image Source: Zacks Investment Research

The nearby chart shows that it has the potential to break out above a key range between 2013-2015 that might help it return to its peaks. Rolls-Royce has been on a much steadier charge higher in 2025 than Oklo, which could be reaching a near-term high if the nuclear FOMO traders take profits.

On the valuation front, the stock has been trading nearly in line with its Aerospace sector at 35.7X forward 12-month. This also marks a 67% discount to Rolls-Royce’s highs, which puts a spotlight on its strong EPS growth outlook.

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