The energy transition involves technologies ranging from renewable energy like solar and wind to upgrading the electricity grid to meet increased demand for energy.
Even though higher interest rates Put pressure on the clean energy sector last year, growing demand for electricity for everything from artificial intelligence to electric vehicle charging is expected to boost the clean technology industry.
Incentives from the government’s Inflation Reduction Act (IRA) aimed at accelerating the transition to domestically produced green technologies are also expected to boost the sector.
Here are three stocks that analysts say are well-positioned to benefit from the U.S. energy transition.
First Solar (FSLR)
Among renewables, First Solar has 31 buy ratings, six hold recommendations, and no sell recommendations. The Tempe, Arizona-based company is the largest domestic supplier and manufacturer of solar modules in the United States, with an order backlog that extends beyond 2027.
“FSLR is ahead of the curve and has established a robust domestic supply chain and manufacturing footprint, making it a big beneficiary of the IRA. As a domestic producer, FSLR is also able to limit high transportation costs and avoid customs duties and import risks,” RBC Capital’s Christopher Dendrinos recently noted.
Analysts at Goldman Sachs are also bullish on the stock, seeing it as a beneficiary of the need for large-scale projects to provide additional power to data centers and AI workloads.
“Companies will likely look domestically so their panels can benefit from a domestic content bonus. In some cases, FSLR even partners directly with companies that own the data centers such as Microsoft (MSFT),” said Goldman Sachs analyst Carly Davenport and her team.
Year to date, First Solar is up 14%.
Vernova (GEV)
The maker of wind and natural gas turbines recently split from GE (GE). Analysts were impressed by the company’s first quarterly release as an independent company last month.
“GEV’s product portfolio covers the entire value chain, from power generation to electron transport and grid management, and we expect its addressable market to double by 2030 compared to 2022 , benefiting from growing electricity demand and increasing grid complexity,” said RBC Capital’s Dendrinos. The company has a $160 price target and an outperform rating on the stock.
Goldman Sachs also has a Buy rating on the stock with a price target of $268.
“We expect GEV to benefit from long-term growth trends as electricity demand accelerates,” Goldman analysts said.
Since the start of the year, Vernova is up 16%.
NextEra Energy (BORN)
The company, with a market capitalization of $147 billion, provides commercial and retail energy derived from renewables, natural gas and nuclear.
“The redomestication of industry in the United States, supported by public policy, will result in an increased need for electricity,” John Ketchum, CEO of NextEra, said during the company’s latest earnings conference call in april.
Analysts see increasing electricity consumption from artificial intelligence and data centers as a key growth driver.
“NextEra’s unregulated renewable business, NextEra Energy Resources (NEER), is uniquely positioned to capitalize on data center growth,” Goldman Sachs’ Davenport wrote.
The stock has 17 buy ratings, five hold ratings and one sell rating.
NextEra is up about 16% year to date.
Ines Ferre is a senior economics reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.
