Solar Stocks: Newest A.I. Play?

First Solar (FSLR) was the best performing stock in the S&P 500 two days in a row this week, now pacing to close out the week as the second-best performer within the index behind Moderna (MRNA). A driving force of this upside momentum is the collective belief that First Solar could be a major A.I. play, with heightened A.I.-driven electricity demand and capacity expansion already underway.

It’s no secret A.I. is going to require some power restructuring, with energy-burning data centers surging in demand to support the necessary A.I. functions. Microsoft (MSFT) recently published that its carbon emissions last year were almost 30% higher than in 2020, hugely due to its investments in data centers that are being utilized to run A.I. functions. Microsoft is just one of many tech names pushing carbon neutrality, with other big players including Amazon (AMZN) and Apple (AAPL).

UBS earlier this week said First Solar stands to benefit, especially if it can continue to build on its market share in the U.S. These analysts see A.I. spend and tax credits affiliated with the Inflation Reduction Act advancing First Solar’s earnings to nearly $37/share by 2027 (vs. $7.74 in FY23).

Another factor contributing to the solar sector’s recent strength is fresh tariffs. President Joe Biden announced increased tariffs on Chinese imports, with the administration planning to impose a 50% tariff on Chinese solar cells this year. That would be double the previous 25%. This is an attempt to limit the influx of subsidized Chinese products pouring into the global market. Following this news, Enphase Energy (ENPH), SolarEdge (SEDG), and SunPower (SPWR) all rose on the session. The Invesco Solar ETF (TAN) is pacing to gain about 7.7% this week, adding to its 14% rally so far this month. However, this pales in comparison to First Solar’s nearly 35% spike just this week.