QuantumScape (NYSE:QS) And NuScale power (NYSE: SMR) both seek to disrupt older energy industries with their newer technologies. QuantumScape is developing solid-state batteries that could replace lithium-ion batteries, and NuScale is developing small modular reactors (SMRs) that could revolutionize nuclear energy.
Both companies went public by merging with Special Purpose Acquisition Companies (SPACs). Shares of QuantumScape opened at $24.80 in November 2020, rose to an all-time high of $131.67 a month later, but are now trading at around $5 per share. Shares of NuScale opened at $10.70 in May 2022, fell to $2 in November 2023, but are now trading around $21. Let’s take a look at why investors have abandoned QuantumScape and embraced NuScale – and whether the latter remains a better buy.
QuantumScape’s solid-state lithium-metal batteries are powered by solid electrolytes instead of the liquid electrolytes found in traditional lithium-ion batteries. That makes them less volatile, more resistant to heat and faster to charge, but they are also more difficult to develop and more expensive to produce than their lithium-ion counterparts.
QuantumScape’s first battery, the QSE-5, has an energy density of more than 800 Wh/L (watt-hours per liter) – versus the average density of 300 to 700 Wh/L for lithium-ion batteries – and can be charged from 10% to 80% in less than 15 minutes. In the third quarter of 2024, it finally began producing and shipping its first small samples of the QSE-5.
That technology sounds promising, but QuantumScape can’t ramp up production until it upgrades its separation process from the current “Raptor” process to the new “Cobra” process to improve cell reliability, production efficiency and overall yields. It plans to complete that upgrade in 2025, but doesn’t expect to begin mass production of its commercial batteries until 2026.
So for now, analysts expect QuantumScape to post a net loss of almost $500 million per year in 2024, 2025 and 2026. They expect QuantumScape to finally generate $7 million in revenue in 2026 when it ships its first commercial batteries.
QuantumScape is still strongly supported by Volkswagenbut it faces stiff competition from similar companies like Blue Solutions and major automakers like Toyota engine And Nio in the solid-state battery market. It’s unclear whether QuantumScape can ramp up production before those rivals do, and that uncertainty sent the stock down about 96% from its all-time high. But even after that steep decline, QuantumScape looks richly valued, with an enterprise value of $1.9 billion.
NuScale produces the only SMRs certified with a Standard Design Approval (SDA) from the US Nuclear Regulatory Commission (NRC). The small reactors, which are installed in ships with a diameter of only 2.7 meters and a height of 20 meters, can be more easily deployed in areas that are not suitable for large nuclear reactors.
NuScale’s designs are modular, so parts are prefabricated, delivered and assembled on site to save costs and time. However, the current NRC certification only covers the construction of a reactor that can generate 50 megawatts of electricity.
For its SMRs to be more cost-effective than a coal-fired power plant, its reactor clusters must generate at least 77 megawatts of electricity. It expects the NRC to certify SDA in 2025 for its 77-megawatt reactor designs — which will take up only about 1% of the space of a conventional reactor generating the same amount of power.
NuScale’s plans are ambitious, but skyrocketing costs forced the company to cancel construction of its six nuclear reactors in Idaho last year and lay off 40% of its workforce this year. These mass layoffs prompted the U.S. Securities and Exchange Commission (SEC) to investigate her employment, severance, and confidentiality agreements.
Still, NuScale shares have risen over the past year as new catalysts emerged. It has signed a new supply agreement with South Korea’s Doosan Enerbility for SMR components, the US Department of Energy (DOE) has offered companies up to $900 million in joint costs to accelerate the development of more nuclear SMRs, and Amazon partnered with Energy Northwest (a consortium of public utilities) to develop four advanced SMRs to support growing energy needs.
Analysts expect NuScale’s revenue to remain broadly stable at $23 million in 2024, but they expect that figure to rise to $102 million by 2025. Yet the company is still deeply unprofitable – and its $2 billion enterprise value already values it at 20 times next year’s sales. .
Both stocks are highly speculative. But if I had to choose one over the other, I’d stick with NuScale, as it’s already generating meaningful revenue, faces less competition, and has clearer catalysts ahead. I wouldn’t touch QuantumScape until it completes its costly Cobra upgrade and gets its first batteries to market.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Leo Sun has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool recommends NuScale Power and Volkswagen Ag. The Motley Fool has a disclosure policy.
Better Energy Stock: QuantumScape vs. NuScale Power was originally published by The Motley Fool
