Shares of solar manufacturer First Solar surged on Wednesday to their highest level in more than a decade highlighting a broad solar stocks rally. U.S.-based solar stocks are benefiting from optimism about new tariffs on Chinese solar cell imports, while First Solar stock was also boosted by a bullish report that sees the company as an AI winner.
First Solar stock gained 18.7% to close at 251.75 on the stock market today. Solar stocks such as Array Technologies, Nextracker and Enphase Energy also made significant gains. Meanwhile, the Invesco Solar ETF added 9% on the day.
Solar stocks have been roiled over the past 18 months by inflation and rising interest rates that made projects more difficult to finance. IBD's Energy-Solar industry group lost 28% in 2023, placing it among the worst performers within the 197 groups tracked by IBD.
But U.S.-based solar firms have been gaining momentum. Last week, President Joe Biden announced that the White House plans to hike tariffs on solar cells imported from China to 50%, up from 25%. China has "used unfair practices to dominate upward of 80% to 90% of certain parts of the global solar supply chain," according to the Biden announcement.
First Solar: An AI Winner?
First Solar, which is the largest U.S.-based solar panel manufacturer, is seen as a beneficiary of the change. Shares gained 5% the day of the tariff announcement.
Even as solar stocks slumped last year, First Solar remained a favorite among Wall Street stock analysts. Shares gained 15% overall in 2023. Analysts expect the firm to benefit from new federal incentives for American-made solar panels. Under the Inflation Reduction Act, solar projects using equipment made in the United States can qualify for bonus tax credits.
On Tuesday, a Wall Street analyst highlighted another potential source of demand for First Solar: artificial intelligence.
Analysts with UBS expect First Solar's earnings could triple from $7.74 per share last year to $36.74 by 2027, helped by AI. An AI-powered prompt response requires roughly 10-times more electricity than a traditional Google search, the report explained. Meanwhile, tech companies such as Amazon, Microsoft, Alphabet and Meta have committed to purchasing renewable power equal to their consumption of electricity. That means solar can help soak up the demand created by AI data centers, according to the report.
"FSLR's unique technology is ideally situated for two of the largest ongoing structural themes: AI driven electricity demand growth and increasing U.S. protectionism," UBS analyst Jon Windham wrote to clients.
UBS reiterated a buy rating for First Solar stock and upped its price target to 270, from 252.
First Solar stock gained 8% following the report Tuesday before adding on with bigger gains Wednesday.
First Solar Stock Breaks Out
With Wednesday's surge, First Solar broke out from a nearly yearlong consolidation pattern, according to MarketSurge pattern recognition. Shares are trading well above a 232 buy point identified by MarketSurge.
First Solar is on pace for its highest closing price since Sept. 19, 2008, according to Dow Jones Market Data. Shares have gained in five of the past six trading days.
Shares of First Solar have gained 45% so far this year, compared to an 11.5% gain for the S&P 500.
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