The Impact of the SVB Collapse on the US Nuclear Fusion Market

On March 10, 2023, Silicon Valley Bank (SVB) collapsed, marking the second-largest bank failure in US history and sending the US stock market into a panic. Guidehouse Insights recently published a blog covering the impact of the SVB collapse on renewables. This post covers the impact it could have on the US nuclear fusion market.

Overall, SVB was acclaimed for providing venture debt to startups and known to substantially invest in climate technology. In early 2022, SVB vowed to commit at least $5 billion in loans, investments, and other financing to support sustainability efforts by 2027. But despite the economic frenzy caused by SVB’s collapse, the climate space has matured significantly, and there will be many climate financiers to replace SVB in serving the climate community—including in the nuclear fusion market.

Varied Impact on the Nascent Nuclear Fusion Market

In the nuclear fusion space, market leaders will be the least affected by SVB’s collapse. Private companies such as Commonwealth Fusion Systems, TAE Technologies, and Helion Energy have millions or billions of dollars in financing—in 2021, these three companies alone accounted for $2.6 billion in venture capital investment. While these companies derive much of their funding from venture capital, none of their primary investors are deeply tied to SVB. Bill Gates and Peter Thiel, who are primary investors in Commonwealth Fusion Systems and Helion Energy, respectively, have connections to SVB, but neither relationship with the bank will hinder either fusion company. Large nuclear fusion companies could face subtle headwinds in the short term but should not be worried about SVB’s failure in the long term.

SVB’s collapse could have a greater impact on the market laggers in the nuclear fusion space, many of whom are startups—including Cortex Fusion Systems, Compact Fusion Systems, and Agni Fusion Energy. Startups in the nuclear fusion market typically have significantly less bandwidth and funding than market leaders, meaning they face higher risk of failure. Although none of these three companies is specifically tied to SVB, the financial fallout has caused short-term stress. However, in the long-term, market laggers who survive can breathe a sigh of relief.

Why Not to Worry

Overall, SVB’s demise should not cause much concern for the US nuclear fusion market. Smaller fusion companies are more at risk than larger ones, but the climate tech space is maturing, and there will be many climate financiers going forward. The 2022 Inflation Reduction Act allocates $6.7 billion toward the nuclear energy space over the next decade, with $280 million specifically earmarked for advancing nuclear fusion. In September 2022, the US announced that $50 million will go toward private fusion companies via public-private partnerships, marking the first substantial public funding of for-profit industry in the US’s national fusion strategy.

Developing a reliable, clean source of energy is clearly a high priority for the US, and nuclear fusion has the potential to provide the solution. Businesses and government organizations looking to learn more about the nuclear fusion industry should stay tuned: Guidehouse Insights will release a report on nuclear fusion in the second quarter of 2023.