Clean energy stocks surge 50% YTD as AI power demand ignites a powerful breakout

Clean energy stocks are in the midst of a dramatic rebound, vaulting past broader equity benchmarks and reviving a sector that has lagged for years. The surge comes at an unexpected moment: even as President Donald Trump rolls back US programs that supported wind, solar and EVs, investors are piling back into the green economy on the promise of near-insatiable power needs from artificial intelligence and accelerating global investment in low‑carbon infrastructure.

Analysts at Jefferies call this a “glory days” window for the theme. The S&P’s flagship clean energy index is up about 50% year to date, far outpacing the MSCI World Index’s gain of less than 20%. That performance has made clean energy stocks one of 2025’s most lucrative trades—despite political crosswinds and persistent skepticism about valuations.

Below, Daily Known breaks down what is driving the rally, where the risks sit and what investors should watch next.

What happened and why it matters

• The S&P Global Clean Energy benchmark has surged roughly 50% in 2025.
• AI’s power appetite is the key marginal demand driver. BloombergNEF expects electricity use from AI-focused data centers to quadruple within a decade.
• China’s buildout of its green economy—and its expanding exports of low‑carbon technologies to developing markets—is supercharging global supply chains.
• Despite US policy retrenchment, economics are doing the heavy lifting as corporations seek reliable, competitively priced “green electrons” to power data centers.
• The rebound is broad, but standout winners include Bloom Energy, which has climbed nearly 500% year to date on demand for fast-deploying, on-site fuel cells.

For investors, the takeaway is that clean energy stocks are being re-rated on fundamentals tied to power demand and supply constraints, not simply on climate policy. That makes the rally more durable in some eyes—but it also concentrates risk in the AI narrative.

Why clean energy stocks are rallying now

Several forces are converging:

• Unstoppable compute demand: Hyperscalers like Amazon, Microsoft and Google are racing to secure firm power for AI. That means long-term contracts, co‑located generation and backup solutions that can be built quickly.
• Global capital flows: Jefferies estimates low‑carbon investment topped $2 trillion last year, an “insane number,” says Aniket Shah, the bank’s global head of sustainability and transition strategy.
• China’s scale: Beijing’s relentless push into low‑carbon manufacturing—from solar modules to grid equipment—continues to compress costs and expand availability, accelerating adoption across emerging markets.
• Economics over ideology: “If you’re offering green electrons to a company, they can be agnostic as long as you can promise delivery when they need it,” says Timothy Ho of Amundi. Corporate buyers are prioritizing price, reliability and speed of interconnection.

Clean energy stocks benefit as this demand meets constrained traditional supply. With gas‑turbine backlogs and long lead times for new power plants, technologies that can be deployed in months—not years—are drawing intense interest.

The AI power paradox: growth tailwind, emissions wrinkle

This rebound comes with nuance. BloombergNEF projects that AI data centers will significantly lift power demand, and while renewables will shoulder a large share, fossil generation will also grow to fill gaps. That adds a layer of irony: the same AI wave energizing clean energy stocks could contribute to higher emissions over the next decade.

• Power demand: Global data center electricity use is on track to multiply, with the United States, Europe and China leading additions.
• Emissions path: Even with aggressive renewables deployment, fossil peakers and combined‑cycle plants will remain part of the mix, pushing the sector’s carbon footprint higher than in a no‑data‑center scenario.

As leaders head to COP30 in Brazil, analysts stress holding two truths at once: the green economy is in a “wonderful moment,” but the planet remains off track for both 1.5C and 2C pathways.

Winners, laggards and the anatomy of the rally

The breadth of the bounce hides significant dispersion:

• Bloom Energy: Up almost 500% in 2025, the fuel‑cell maker signed a July deal to power Oracle’s AI data centers and plans to double manufacturing by end‑2026. RBC’s Christopher Dendrinos says the product is “tailored” to AI’s on‑site power needs with deployment times as short as 90 days.
• Policy quirks: Because Bloom’s fuel cells are largely powered by natural gas today, the firm benefits from incentives that were not available under the prior administration—illustrating how clean energy stocks can outperform even under shifting policy regimes.
• Skepticism remains: Bank of America argued in September that Bloom’s “fundamentals don’t justify” the share price jump. Bloom counters that revenue should climb more than 30% this year to about $1.9 billion and that its balance sheet has strengthened.
• Solar names: SunRun and SolarEdge have posted triple‑digit percentage gains but remain a fraction of their 2020‑2021 peaks. Guggenheim’s Joseph Osha frames the rebound as recognition that the business can “survive,” not a return to those lofty pandemic-era multiples.
• Capital giants: Brookfield raised a record $20 billion for its clean‑energy transition fund and agreed to invest up to $5 billion deploying Bloom fuel cells at AI data centers—evidence of large, patient capital leaning into the theme.

Clean energy stocks thriving in 2025 share a few traits: exposure to fast power timelines, credible unit economics and direct ties to data center loads. Broader manufacturers and project developers are rising too, but leadership skews toward companies solving reliability and speed.

Policy backdrop: the market is looking past US headlines

Trump’s rollback of federal programs and permitting for some renewable segments has created uncertainty, especially in residential solar. Yet the clean energy stocks rally suggests investors are focusing on:

• State and corporate demand signals that remain strong
• Non‑US policy engines in Europe, China and parts of Asia
• Project economics that compete with traditional generation when factoring construction timelines and grid constraints

In short, the market is distinguishing between ideology and economics. Where renewable projects can deliver firmed power quickly at attractive prices, buyers are showing up.

The bear case: is too much riding on AI?

Not everyone is convinced. Several fund managers warn that the rebound is heavily tethered to AI narratives that could fade:

• Energy efficiency shock: DWS’s Tim Bachmann points to the “Deepseek moment,” when a Chinese startup showcased a low‑cost, energy‑efficient AI approach. If AI’s power intensity drops faster than expected, parts of the clean energy trade—especially suppliers to cooling and power equipment—could reprice lower.
• Bubble risk: Schroders’ Alex Monk says a bust in AI would likely drag down alternative energy equities, given their rising correlation with the compute buildout.
• Quality filter: Renaud Saleur of Anaconda Invest argues some of the biggest winners are “not really the quality ones,” and questions whether AI power demand can be met at all. His base case: “a lot of disappointment.”

For now, the bull case is winning. But even bulls concede that clean energy stocks must eventually reflect cash flow growth, not just narrative momentum.

How investors are navigating the rally

To balance upside with discipline, portfolio managers point to a few tools:

• Focus on contracted power: Companies with multi‑year offtake deals or co‑location frameworks with data centers tend to have more resilient revenue visibility.
• Prefer speed to interconnect: Technologies that can be deployed in months have a structural edge over projects that require multi‑year permitting and new transmission.
• Watch unit economics: Favor businesses with improving gross margins, credible pathways to positive free cash flow and capital intensity that does not spiral as orders scale.
• Diversify AI exposure: Pair direct AI power plays with grid modernization, storage, and high‑efficiency equipment suppliers that benefit even if AI’s power curve flattens.
• Stress test valuations: Many clean energy stocks trade on forward narratives. Compare enterprise value to realistic cash generation under base, bull and bear demand scenarios.

What could keep the momentum going

The next few quarters bring measurable catalysts:

• Long‑term power deals: More hyperscaler announcements on contracted clean power or on‑site generation
• Grid upgrades: Regulatory progress on interconnection queues and transmission expansion
• Manufacturing scale: Evidence that capacity expansions can be executed without margin erosion
• Policy clarity: Updated incentives or permitting reforms that reduce capex risk and shorten timelines
• Earnings proof: Revenue growth translating into stronger balance sheets and cash flow from operations

Clean energy stocks are likely to remain sensitive to each of these, especially earnings guidance that links AI demand to booked revenue.

What could cool or reverse the rally

Key risks include:

• A sharp drop in AI power intensity that undercuts demand for on‑site generation, cooling and grid upgrades
• Extended risk‑off in equities that compresses multiples for long‑duration cash flows
• Supply chain hiccups for transformers, turbines or key components that delay deployments
• Policy setbacks in major markets that lengthen permitting or reduce incentives for firmed clean power
• Over‑extension: If capital floods in faster than projects can be executed, returns could compress

As Amundi’s Ho cautions, “broad thematic flows” can detach from valuations. Clean energy stocks may still face pockets of overenthusiasm as the trade broadens.

The bottom line

Clean energy stocks are enjoying their strongest run in years, defying US policy headwinds and riding a structural wave of global low‑carbon investment and AI‑driven electricity demand. The rally has legs if corporate power needs keep climbing, grid bottlenecks persist and fast‑deploy technologies prove their economics at scale. But investors should maintain a quality filter, avoid chasing speculative names and insist that revenue growth translate into healthier balance sheets.

This cycle looks different from the 2020‑2021 surge: less about crisis‑era rates and more about megawatt‑hours that need to be delivered. Whether AI becomes a durable backbone for the theme or a transient hype cycle will determine how far this leg can run.

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Article Source: Bloomberg
Image Credit: Gage Skidmore via Flickr (CC BY-SA 2.0)