X-energy IPO signals warming public market for climate tech

This week, nuclear energy startup X-energy went public, raising $1 billion in an upsized share offering. Retail investors apparently could not get enough, with the stock popping 25% in its first hour of trading, in an offering that appears to have delivered a windfall for its early backers, including Amazon. In the same week, geothermal startup Fervo filed for an Initial Public Offering (IPO). While the exact size of Fervo’s offering has not been disclosed, private investors previously valued the company at around $3 billion, according to market data provider PitchBook. Both companies chose a traditional IPO path rather than merging with a Special Purpose Acquisition Company (SPAC), signaling confidence in broad public investor demand.

The public market’s interest in these startups is closely tied to the artificial intelligence boom. The AI craze has taken a trend of rising demand for electricity and made it a salable narrative for energy-focused startups. Companies specializing in nuclear fission or enhanced geothermal have aligned with this trending narrative just as their technologies matured. These public listings are expected to please venture investors by allowing them to return capital to their Limited Partners (LPs), unlocking climate tech funding that had been tied up during a prolonged drought of public market debuts.

However, this momentum may not lift the entire sector. Public markets appear to be warming to climate tech startups, but the broader market is experiencing a K-shaped divergence—defined as a divergent market trajectory where some sectors thrive while others struggle. While energy-related startups attract significant capital, other climate tech companies face a tighter funding environment. According to data from climate tech data provider Sightline Climate, venture capital and growth funds raised about $6.5 billion last year. While this matches the total raised in 2021, the proliferation of new funds means individual fund sizes are smaller, potentially limiting the capital available for individual founders.

Instead, capital is increasingly concentrating in mature, large-scale projects. Sightline Climate’s data highlights how infrastructure funds dominated the sector last year:

• A total of 42 funds dominated climate tech fundraising, focusing on renewables, grid technologies, and energy storage.
• These infrastructure funds raised 75% of all dollars in the sector.

This concentration suggests that the K-shaped trajectory is not going away anytime soon, leaving startups without mature, capital-ready technologies to find alternative paths to scale without access to deep public market capital.

Why it matters

The public market’s warming to climate tech, driven by AI-related electricity demand, suggests a potential shift for capital-intensive startups that were previously favored less by stock pickers.