What are the challenges they face?

One is regulatory. At least in the US, every nuclear reactor that produces at least 100 MW needs to carry a 375 million dollar insurance policy at minimum. Under 100 MW there is an alternate schedule that ranges from 5 million to 75 million scaling based on output. But the net result is that it's still more profitable to built a single large reactor, since a 1 GW reactor is less to insure than 10 100 MW reactors. This is written into law, it would require Congress to change it.

Second is that nuclear reactor efficiency tends to improve with size. The ratio of thermal watts to electric watts tends to be better with large reactors. I'm not super well versed on the engineering tradeoffs here by my rough understanding is that waste heat scales with surface area while useful energy extraction scales with volume.

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