Here’s the lead-in to Porter’s latest ad:

“Why Bill Gates, Sam Altman, and even Warren Buffet are all investing hundreds of millions of dollars into this controversial new technology.

“THE A.I. KEYSTONE

“Without it the artificial intelligence market will collapse”

And then, after a brief lesson in classical architecture to explain just what a “keystone” is (the last piece of stone at the center of an arch, which makes the structure stable), he hints at what he’s actually talking about…

“I’m not talking about processing units, computer chips, or anything that Nvidia or AMD is involved with…

“This is something completely different.

“A story nobody else has connected the dots on.

“I call it The Artificial Intelligence Keystone.

“Because without this new technology, I believe the entire A.I market will collapse in upon itself like a dying star.”

And this ad is a little different, it’s not selling a subscription — you get no ongoing access, no model portfolio, no monthly issues, what you get is a package of a half-dozen ‘special reports,’ most of which are presumably repackaged past issues of his The Big Secret on Wall Street newsletter. This “A.I. Keystone’ is a single special report, and it apparently teases a specific idea.

So… you can pay $199 for it, “all sales final and no refunds,” and I’d guess that will immediately lead to you becoming the most compelling target for Porter and Stansberry Research marketing, since if you like the special reports you might be willing to pony up $1,425 for a subscription to The Big Secret.

Or we can figure out the stock, and you can think on it for yourself and make your own call.

And since I’ve covered the teaser ads from Porter for years, I can probably tell you what a few of those other Special Reports are hinting at, too… we’ll get to that at the end.

But first… what’s the “A.I. Keystone?” Here are our hints:

We get some quotes and name dropping as Porter builds the story:

“I don’t see a way for us to get there without [the Keystone].” — Sam Altman, CEO of Open AI

“[It’s] intrinsically tied to national security. — U.S. GOVERNMENT INSIDER

“Jeff Bezos has raised $130 million for a little-known Canadian company developing The A.I Keystone.

“Peter Thiel, co-founder of PayPal, has pledged $2 million to a company working on The A.I Keystone.

“Warren Buffett, Reid Hoffman, Ken Griffin, and Jim Simons have all invested in The A.I Keystone too.”

And he sums up the problem as being basically, “A.I. needs so much electricity to meet its ambitions that the world is not ready” … and more particularly, that the US is not ready. Another little excerpt…

“Elon Musk predicts that by 2045 the power demand in the U.S will have tripled from current levels – largely driven by A.I’s needs.

“They know that unless the insatiable energy demands of artificial intelligence are met, the industry will never go mainstream.

“And right now, there is no solution.

“Fossil fuels are the primary energy source used to train and operate A.I systems and could continue to meet the growing energy demands…

“But that would require the woke Silicon Valley tech companies and progressive politicians to turn their backs on the religion of Climate Change.

“And with the activists already up in arms about the environmental impact of artificial intelligence, this is untenable to the ruling class.

“So they’ll argue that renewables like wind and solar should be used to meet the energy demands of A.I…

“But the reality is that there is ZERO chance of these renewables producing enough low-cost energy to meet A.I’s needs.”

The solution? Well, it’s the one that has been obvious but disliked for a few decades now: nuclear energy. And you can see why Porter would like nuclear power, it is the perfect energy source of the iconoclast: It is inherently much more sensible and efficient and productive than any fossil fuel energy, at least in theory, and it creates no air pollution and almost no pollution at all, other than the scary-sounding “nuclear waste.” And that’s if you use reactors which were designed and built in the 1960s and 70s. There are challenges, including the big scary meltdown threat and the challenge of storing nuclear waste and the proliferation of nuclear weapons, but those challenges should have solutions, whether through engineering, politics or education, and the basic logic is extremely appealing… and gets more appealing if we ever take into account the horrific impact and death toll of smog, acid rain, particulate emissions and other slow killers that make coal such a horrible source for electricity. And yes, coal still generates more than a third of the world’s electricity, and China is still building more than 100 coal plants a year. A.I. or no A.I., the world’s demand for electricity is increasing dramatically over time, as the population grows over time and as more and more people get access to reliable electricity for the first time, dramatically improving their quality of life.

So conceptually, at least, I agree with Porter on this one — and with Greenpeace founder Patrick Moore, who started the small trickle of “nuclear is part of the solution” environmentalists and climate activists almost forty years ago when he went against the orthodox anti-nuclear stance of his colleagues. I don’t know if that logic will really drive the future trends, or if we’ll remain largely afraid of nuclear power in the US, but that’s the basic idea. If we need more baseload power, not just to replace coal plants but to eventually replace natural gas plants, too, nuclear energy is the most viable solution. Windmills and solar power are great, and energy storage will also help, but none of those are anywhere near being scalable enough and consistent enough yet to completely replace conventional power plants. I don’t know if A.I. will really end up being the massive energy hog that forces an energy reckoning, but I suppose it’s possible — certainly data centers are consuming a lot more electricity, and new technologies continue to demand more power.

The IEA is estimating now that data centers consume about two percent of electricity, globally, and that the power-thirsty GPUs which drive most A.I. work right now could help to roughly double that electricity consumption within a couple years… and even in the US, where a lot more work is being done on increasing efficiency in data centers, and where the impact of new data centers is less dramatic than in some places, the electricity consumption of that sector is expected to grow by a good 30% in the next couple years.

So that’s the backdrop as I understand it. What does Porter say when he gets into his tease?

“The ONLY energy source that can sustainable meet the insatiable power demands of artificial intelligence.

“Just one pellet of The A.I Keystone – about the size of your fingertip – can produce the same amount of energy as:

“One ton of coal
“149 gallons of oil
“17,000 cubic sq.ft. of gas
“7,034 solar panels.

“All while producing zero emissions.

“I’m talking, as you might’ve guessed, about uranium.

“However, uranium and nuclear energy alone aren’t the answer to the energy demands of artificial intelligence.

“That’s why I’m NOT telling you to rush out and buy uranium, mining stocks, or a nuclear energy ETF.”

And he references the one nuclear plant that has started up in the U.S. in this century…

“Plant Vogtle in Waynesboro, Georgia, will be America’s first new nuclear plant since the 1990’s.

“The only catch?

“It took 15 years to build…

“And cost more than $30 billion.

“Don’t get me wrong, this is a massive milestone for Waynesboro and the country.

“The plant is projected to power 500,000 homes and businesses for the next 60 to 80 years… but Plant Vogtle’s story exposes a brutal truth:

“Building nuclear power plants is expensive, time-consuming, and complicated….

“According to the World Nuclear Industry Status Report, the average time to construct a nuclear power plant is ten years.

“This means, traditional nuclear power plants will be unable to meet the exponentially growing energy demands of the A.I sector.

“It could take decades for the U.S. to build out the necessary infrastructure.”

So how do we make that leap from “A.I. is sucking up all the electricity now!” through “building a power plant takes decades” to find some sort of “make me rich today” solution? Porter says, “small reactors.” So this is likely a repackaging of a pitch he made about small nuclear reactors last year… but lets’ check the details:

“… thanks to a single decision on February 21 last year…

“…a new type of nuclear energy will be able to provide practically endless clean energy all across the country.

“A New Nuclear Energy Revolution

“For the first time in history, nuclear energy has become scaleable.

“A new technology was recently approved by the U.S. government… and it’s THIS technology that will act as the Keystone for the A.I industry.”

So what Porter’s talking about are Small Modular Reactors (SMR), nuclear plants that can be built in a factory and moved around the world, or sited together to build up a larger power plant. Here’s how he describes the technology:

“As the name implies, an SMR is a nuclear reactor that produces nuclear energy but is MUCH smaller than a typical reactor.

“Which means it has all the advantages of a nuclear reactor, with almost none of the disadvantages.

• It can produce electricity without overheating.
• It can self-regulate.
• It can be paired with renewable resources.
• It can be built in two years (as opposed to ten).
• It can be deployed on top of shuttered coal plants, of which we have 300 in America right now….
• An SMR can produce energy for 10 years without being refueled, whereas a typical reactor has to be refueled every 18 to 24 months…..

“And this is why Small Nuclear Reactors (SMRs) are The Keystone technology to the A.I industry.

“It’s the ONLY way tech companies can meet the energy demands of artificial intelligence without fossil fuels.”

So yes, we’ve seen a bunch of SMR designs get talked about over the past couple years, including some backed by big-name tech folks (Sam Altman has invested in Oklo and Helion, Bill Gates funded TerraPower starting almost 20 years ago).

But where to invest, you ask? Porter starts the hinting here…

“In addition to Oklo, a number of other companies are working on “new breeds” of advanced microreactors…

“Including GE Hitachi, Holtec, Kairos Power, NuScale Power, TerraPower, and X-energy.

“However, despite the potential of these companies, I don’t recommend you go near them. You see, there is one major roadblock each of them faces….

“… no one’s been able to design an SMR that meets the strict criteria of the Nuclear Regulatory Commission of the U.S. government.

“That is, until now…

“… the VOYGR-12… in 2023, it became the first ever SMR design to gain regulatory approval by the U.S. government.

“This means it has been cleared for use in the United States.

“Developed by a company called NuScale Power, the VOYGR-12 can generate 924 megawatts of electricity on 32 acres of land.”

But there’s a problem with NuScale Power, too, according to Porter…

“Problem is, NuScale doesn’t have any money.

“According to analysts, they only have 15 months left of cash to finance their operations.

“And until they get the funding they need to build SMRs, we’re still many years away from seeing them become a profitable enterprise.

“Until that day comes, I wouldn’t suggest you buy a single share of this stock. In fact, their share price is down 75% over the last year.”

Porter doesn’t go into the details about the bad news in the challenges of NuScale, it’s not just money — they had to cancel their first project, which was planned to start construction soon and be operating by 2026 (later delayed to 2029) in Idaho, because the cost overruns and some local opposition meant that the per-watt electricity price to the eventual subscribers (a group of local electrical utilities in the region) had almost doubled in a few years. I guess technically having more money would have fixed that, too, since they could theoretically just subsidize their first plant to prove the concept, but NuScale has already gotten more than $200 million from the government, along with $1.4 billion in promised “cost-sharing” support for the construction, so it’s clearly not just money.

NuScale has some other irons in the fire, and they still have more than $100 million in cash left over from their initial SPAC merger a couple years ago, but losing their big pilot project is a huge challenge… and they’re being sued by every class action firm imaginable because investors are angry about the failure of what was briefly a hot “story stock.” I can see why Porter wouldn’t want to buy that one.

So what does Porter think you should buy? That’s where we get to the “this is a repeat” part of the story — but if you’re new, I’ll hold on to the suspense for a moment, here’s how he teases his recommendation:

“There is also a far better company than NuScale…

“You see, NuScale may be the first company to get the government’s stamp of approval for building SMRs.

“But another company is actually building one right now, in real-time and it’s already got the backing of our government.

“The Military-Backed A.I. Keystone Company….

“It’s a publicly traded company with a pipeline of multi-billion-dollar nuclear contracts with the U.S. government, big pharma companies, and major utility providers.

“In doing so, this company has strategically locked in their future revenues for the next 25 years.

:And I believe all but guaranteed their position as the dominant firm providing nuclear energy to America.

“As the former Bureau of Labor Statistics’s Economist says, ‘This company’s future is tied to the future of nuclear power both military and civilian.'”

Other clues…

“… this company:

• Is the sole manufacturer of nuclear reactors for U.S. military aircrafts and submarines.
• Is one of only two providers licensed to store and process uranium for those reactors.
• Has a near-lock on supplying the Navy with critical nuclear inputs, and…
• Delivers almost all of the mechanical equipment for the Navy’s nuclear platforms.”

So who is this? Porter is again teasing BWX Technologies (BWXT), as he has done for close to a year now — we saw Porter’s first pitch for this stock back in early May of 2023, when it was trading around $65. So it has certainly done well — here’s what I said to the Irregulars in my Quick Take at the time:

“… he says not to buy Nuscale (SMR), which is the best known startup in the space, since it will need more capital to really get going, but to instead buy the monopoly provider of small reactors to the military, BWX Technologies (BWXT), which is a company we’ve written about a few times because it handles most of the reactor business for the nuclear navy, and that’s inherently a stable and very long-term business (partly because the ships last for decades and require refurbishment and refueling). I still have a slight preference for Huntington Ingalls Industries (HII) and its aircraft carrier business, since that’s even steadier and cheaper than BWXT and is driven by a lot of the same trends, but HII does not have that potential for small nuclear reactor development (BWXT is working on early plans to build small, portable reactors for military bases, which could have civilian applications as the model is proven out). It’s a good company, probably near the top end of a reasonable valuation at about 22-25X earnings (they’re likely to grow earnings about 10% a year), but that kind of stability can certainly be worth paying a premium… especially if you have high hopes about that small reactor business becoming meaningful in the next decade or so.”

Turns out I was a bit too conservative in that valuation assessment, since the stock has soared quite a bit higher… BWXT is now at about $83, a new all-time high for the stock. There has been no “big news” during that time, they just continue to beat earnings estimates by a bit each quarter, and generate good cash flow, as befits a company that is, at its core, very predictable as long as Congress doesn’t suddenly close down a big chunk of the US Navy. I don’t feel too bad about “missing” BWXT at that point, mostly because since I penned those words HII has done well, too, roughly matching BWXT’s return as investors become more confident about their balance sheet turnaround and the future of the aircraft carrier in US defense strategies… but I’d still say that BWXT is a reasonable-and-maybe-a-little expensive idea. They will probably grow their cash flow by about 10% per year, on the back of 5-10% revenue growth, and a lot of their future is already written by long-term government contracts and Navy programs that are likely to persist for decades, so sometimes — maybe like now — they’ll get a little more richly valued than you’d like, just because the odds of bad financial news are very low.

Today BWXT is expected to earn about $3.12 in 2024, growing to $3.48 in 2025, after finishing out 2023 at $2.91 (that’s still an estimate, they won’t report their Q4 until late February). Since their reorganization about a decade ago, when they separated from Babcock & Wilcox, BWXT has had pretty consistent margins and has grow revenue by about 6-7% per year, on average, and grown net income by a similar amount, about 7% per year. Things have been slightly better than that over the past couple years, but it’s not necessarily a straight line…. the improvement beyond that ~7% growth rate has largely been driven by consistently using their cash flow to buy back shares, so they’ve reduced the share count by about 15% since 2015, helping to generate earnings per share growth of 10-11%. They have told investors to expect “mid-single-digit” growth in both revenue and earnings in 2024, with free cash flow growing a little faster than earnings… that could change, too, but without a more optimistic outlook from the company when they report next, I’d be more comfortable with $70-75 as a buy price than I am with $83, which is now about 26X expected 2024 earnings.

We can’t know the future for BWXT, but I’d say the probability of it being similar to the past decade is pretty high. We could have major defense budget cuts that would gradually pressure their revenue on the downside, but we could also have more investment in microreactors or new naval programs that increase their revenue, and it’s at least possible that their non-government work (including medical radiology as well as civilian reactors) will be able to grow faster or become much more meaningful for BWXT shareholders. As of last quarter, their government operations, which includes equipment for the Navy as well as their microreactor work and their uranium processing business as the monopoly fuel supplier for the nuclear navy, are still growing faster than their commercial work, which includes refueling and “field services” for reactors as well as radiology supplies for medical work… and the government stuff is still more than 80% of the business, so this is unlikely to tip dramatically unless the government dramatically changes its priorities or its budget. Which usually happens pretty slowly.

So there you have it, dear friends — yes, Porter’s “Linchpin of A.I.” is small nuclear reactors, and he thinks Naval contractor BWX Technologies (BWXT) is the most appealing investment in this space. See great things ahead for SMRs as A.I. increases electricity demand, or for the Nuclear Navy? Expect that to turn into good results for BWXT? Have other favorites in the space?
Let us know with a comment below. Thanks for reading!

P.S. I promised to share “solutions” to some of those other “Special Reports”, too, since we’ve covered a few of those in the past when they were fresh from the Big Secret on Wall Street teaser ads… the “$1 Trillion Powerhouse” is likely a repeat of his pitch for PayPal (PYPL) back in November, the “Apple of Agriculture” that might “literally save the world 20 years from now” is likely a repeat of his September pitch for Deere & Co. (I also wrote some about Deere for the Irregulars last week), and the “Prettiest Stock on Wall Street” is likely a re-tease of Ulta Beauty (ULTA), which was also one of the “A.I. Die Up” stocks he touted back in November.

Disclosure: Of the stocks mentioned above, I own shares of Huntington Ingalls Industries. I will not trade in any covered stock for at least three days after publication, per Stock Gumshoe’s trading rules.