We propose a loop optimization algorithm based on nuclear norm regularization for the tensor network. The key ingredient of this scheme is to introduce a rank penalty term proposed in the context of data processing. Compared to the standard variational periodic matrix product states method, this algorithm can circumvent the local minima related to short-ranged correlation in a simpler fashion. We demonstrate its performance when used as a part of the tensor network renormalization algorithms [S. Yang, Z.-C. Gu, and X.-G. Wen, ] for the critical two-dimensional Ising model. The scale invariance of the renormalized tensors is attained with higher accuracy while the higher parts of the scaling dimension spectrum are obtained in a more stable fashion. Published by the American Physical Society 2024