A significant resurgence in clean-tech stocks has garnered attention from investors looking to shift their focus from years of underperformance in the green economy. This revival comes as a surprise, considering ongoing policy rollbacks by the Trump administration affecting renewable energy initiatives, including wind, solar, and electric vehicle programs.
Remarkably, clean energy equities have outperformed many major stock indexes this year, with the S&P’s primary clean energy gauge surging approximately 50%, while the MSCI World Index has seen a gain of less than 20%. Analysts attribute this growth largely to burgeoning demand for energy from data centers that are essential to the artificial intelligence (AI) sector, as well as China’s aggressive expansion of its low-carbon economy. Notably, despite President Trump’s skepticism towards green initiatives—often dubbing them a “green scam”—investor sentiment appears increasingly optimistic.
Jefferies analysts have referred to this period as the “glory days” for green investors. Aniket Shah, their global head of sustainability and transition strategy, emphasized that focus should shift from Trump’s rhetoric to global capital inflows into clean technologies. He highlighted $2 trillion earmarked for low-carbon spending last year as evidence of a flourishing green economy. Factors like the impressive growth of China’s green sector, alongside the sustainability efforts of AI giants such as Amazon, Microsoft, and Google, have significantly contributed to this optimism.
However, this optimism is coupled with concern. Demand for electricity from AI applications is projected to quadruple over the next decade, and while renewables will play a crucial role, fossil fuels will still contribute to increased emissions, as indicated by BloombergNEF. As world leaders prepare for the COP30 climate summit in Brazil, it is crucial to recognize that even with the recent uplift in green stocks, the planet is still expected to exceed critical temperature thresholds of 1.5C and possibly even 2C.
Some investors remain skeptical about the sustainability of the recent rally in clean stocks. Concerns arise primarily due to the heavy association with AI, which carries its own speculative risks. Tim Bachmann, a climate-tech portfolio manager at Deutsche Bank’s DWS, warned that investors should brace for possible disillusionment, especially following the unexpected developments in low-energy AI technologies. Observations from other analysts suggest that sectors within alternative energy may suffer if an AI bubble bursts.
Deirdre Cooper, head of sustainable equity at Ninety One Plc, cautioned against getting swept up in the speculative enthusiasm surrounding certain clean-tech stocks. Renaud Saleur, CEO of Anaconda Invest, expressed doubts over whether energy demands from AI can ever truly be satisfied, suggesting that such a scenario would likely lead to widespread disappointment.
Among the top performers in the clean energy space is Bloom Energy Corp., whose stock has soared by nearly 500% this year. The company, known for providing solid-oxide fuel cell systems, has found strong demand particularly due to agreements to supply power to Oracle’s AI data centers. Bloom’s ability to rapidly deploy its fuel cells has attracted significant attention, and it is set to expand its manufacturing capacity in response to rising demand.
Despite this remarkable growth, analysts from Bank of America have raised red flags, suggesting Bloom Energy’s share price increases do not reflect its underlying fundamentals. Nonetheless, the company’s head of investor relations maintains that anticipated demand and an improved financial outlook justify the stock’s performance.
Although many investors remain wary, others like Natalie Adomait from Brookfield’s renewable power unit see strong demand for low-carbon energy sources driven by AI needs. Recently, Brookfield announced a monumental $20 billion raise for a private fund focused on the clean energy transition, alongside a substantial $5 billion investment in Bloom Energy’s fuel cells for AI data centers.
While the landscape for clean energy investments may seem favorable, experts remind investors that underlying valuations must not be ignored. Furthermore, the evolving political climate, including lingering challenges posed by Trump’s policies, adds a layer of complexity to the outlook for the clean-tech sector. As the market adapts, the green economy will likely continue to attract both buoyant interest and cautious scrutiny from investors navigating this dynamic field.
