From Investor's Business Daily, September 10:
President Donald Trump has taken a skeptical view of renewable energy since returning to the White House in January. That leads many investors to believe solar stocks could be on life support. However, the Trump administration surprised investors last month by deciding on a more sector-friendly framework for projects to continue receiving federal tax credits before they phase out.
Along with lower interest rates and artificial intelligence's voracious power needs, it's a new dawn for solar stocks.
Trump Budget Guidance Eases Fears
The stock market believed that Trump's "Big Beautiful" budget was a death knell for solar, with its cuts to clean energy and doubling down on fossil fuels. Tax credits phase out sooner than those for other technologies projects and have to either be completed by the end of 2027 or begin construction by July 2026.However, solar stocks broadly advanced on Aug. 15 after the Treasury Department released new guidance. It made clear that, depending on the size, wind and solar projects can qualify for federal investment and production tax credits if "physical work" or a 5% investment has taken place by July 2026. Projects also have a four-year window from the beginning of construction to complete the project. Also, the guidance is not retroactive, so previous projects that started construction earlier are still eligible.
Previously, such projects were tax credit eligible if developers spent at least 5% of the planned cost....*****...Solar Stocks Jump
The 27 stocks in the IBD-tracked Energy-Solar industry group have collectively advanced around 15% since the guidance announcement. For the 2025 stock market, the solar group has gained just 4.9%, but that belies a strong 44% run since the end of April, gaining more than 13% in August alone. It's on track for a fifth straight monthly increase in September.
Nextracker (NXT) CEO Dan Shugar, in an interview with IBD, said the industry was OK with solar tax credits going away as long as there was an "orderly transition" and that the projects already underway are still eligible.
"That's basically what happened," Shugar said, adding that even with solar tax credits going away, at the same time solar costs are going down and the cost of conventional power is going up.
The Nextracker CEO added that in three or four years, solar projects will not have tax credits but that "there will be a level playing field" and solar can compete on cost with other fuel sources.
"That's why you saw solar stocks go up after the Treasury guidance. Uncertainty was removed from the market and customers, for the most part, are saying 'they're good,'" Shugar said.
Trump Risk Off The Table
With Trump's decision to maintain solar tax credits, a major risk has been lifted.
GLJ Research analysts on Aug. 15 proclaimed that the Treasury's guidance "couldn't be better news for the residential solar space." The firm noted that the stock market broadly believed that Treasury was going to make it impossible for residential solar companies to take advantage of the Biden-era tax credits in years to come, but that the Trump administration "did the opposite."
Meanwhile, Guggenheim analysts added last month that the Trump administration's guidance was good news for solar tracker suppliers such as Nextracker and Array Technologies (ARRY), with these companies "positioned to benefit the most."
"Solar investors were surprised, relieved that Republicans did not fully repeal the IRA's solar incentives," Rene Reyna, Invesco's Head of Thematic & Specialty ETF Strategy, told IBD.
"That news resulted in an accelerated sort of recovery, if you will, as it just resulted in better outcomes," he added.
However, Reyna believes that moving forward it's all about interest rates when it comes to solar energy's outlook as AI data center buildout and soaring electricity demand also continue to support the sector.
Solar Stocks' Surprising Recovery....
....MUCH MORE
In a way similar to how aluminum is basically solidified electricity, commodity solar is now basically interest rates materialized.