A dramatic recovery in clean technology stocks has green economy investors hoping they can finally turn the page after years of underperformance.
The timing is a little unexpected. Green stocks have been one of this year’s most lucrative bets, even as President Donald Trump canceled many U.S. government programs dedicated to promoting wind power, solar power and electric vehicles.
These stocks are significantly outperforming most other stock indexes. S&P’s main index that tracks clean energy is up about 50% this year. The MSCI World Index is up less than 20% over the same period.
Much of that development is pegged to the near-insatiable demand for energy to power the data centers that power artificial intelligence. This also reflects China’s continued efforts towards building a low-carbon economy. For investors, those factors mattered more than Trump’s attacks on what he often calls “green fraud.”
Jefferies analysts seized the opportunity to declare this a “glorious day” for green investors, even dedicating an entire client event to the idea.
Aniket Shah, global head of sustainability and transition strategy at Jefferies, says investors are too focused on President Trump’s anti-environmental rhetoric in the United States. Instead, they should look at the level of global capital being poured into clean technology. Shah said the $2 trillion spent on low-carbon spending last year was an “insane number” that showed the green economy was enjoying a “great moment”.
He cited a variety of factors, including China’s phenomenal rise in green economy and exports of clean technology to developing countries. And then there are the so-called hyperscalers pushing AI, including Amazon.com, Microsoft and Alphabet’s Google, all of which are “very much a sustainability story,” Shah said.
But there is an irony to the newfound excitement among green investors. AI-related electricity demand is expected to quadruple within a decade, and while renewables will play a big role in driving that development, fossil fuels will also be a big part of the mix, increasing emissions in the process, according to BloombergNEF.
So, as world leaders prepare to gather for the COP30 climate summit in Brazil, Shah said it is important to recognize that even with this year’s green rebound, the planet remains on course to stay below the critical temperature threshold of 2 degrees Celsius, not just 1.5 degrees Celsius. “You have to keep both stories in mind at the same time,” he said.
But not all investors are convinced that the rally in environmental stocks is solid. And some worry that much of it is related to AI surrounding bubble speculation.
Some of the outperforming stocks are “not really high-quality stocks,” said Renaud Sareur, founder and chief executive of Anaconda Invest, a Geneva-based boutique hedge fund focused on the energy sector.
He also questions whether the insatiable energy demands of AI-powered data centers will be met. “It is impossible to drive additional demand for AI,” Tharoor says. The final game will be “hugely disappointing”.
Tim Bachmann, climate technology portfolio manager at Deutsche Bank AG’s fund management division DWS, said investors need to prepare for a new “deep-seeking moment”, referring to a Chinese startup that surprised the world earlier this year with its low-cost, energy-efficient version of AI.
The idea that AI might be powered by significantly less energy than envisioned in the U.S. “has shocked not only data center operators but also suppliers of cooling, ventilation, cables and transformers,” Bachmann said.
Deirdre Cooper, head of sustainable equity at NinetyOne, said the Anglo-South African asset manager was “careful to avoid any hype” about parts of the green rally. She says it’s clear that some clean tech stocks are “caught up in the speculative purpose of AI trading.”
The alternative energy sector, along with the broader market, is likely to be dragged along by the bursting of the AI bubble, said Alex Monk, portfolio manager in Schroders’ global resource equities team.
At the same time, he also said, “The DeepSeek moment was really interesting.” That’s because the sustainable energy sector has actually “held up relatively well compared to the utility scale sector and the electricity demand sector, which is probably the baseload electricity type part.”
The best-performing stock on the S&P Global Clean Energy Transition Index is Bloom Energy Corporation. The company, which makes solid oxide fuel cell systems that can generate electricity where it’s needed, is up nearly 500% this year.
Bloom Energy agreed in July to provide on-site power to Oracle’s AI data center and plans to double its manufacturing capacity by the end of 2026 to meet demand. And with a shortage of gas-fired turbines proving to be slowing the construction of new power plants, Bloom’s fuel cells, which have a short deployment time of 90 days, are attracting great interest.
“The company’s product is very finely tuned and leverages the overall AI data center demand trends,” said Christopher Dendrinos, an analyst at RBC Capital Markets. “That was a big driver for the stock price,” Dendrinos said.
And because Bloom Energy’s fuel cells are largely powered by natural gas — at least for now — they actually benefit from Trump administration incentives that didn’t exist under Biden.
But some people urge caution. In a September memo sent to clients, Bank of America analysts said Bloom Energy’s “fundamentals do not justify an appreciation in the stock price.”
Michael Tierney, Bloom’s head of investor relations, said the company’s valuation is based on both expected strong power demand and improved financials, including revenue expected to increase by more than 30% this year to about $1.9 billion.
“We’re not a startup anymore,” he said. “Our balance sheet is much better than it has been in the past,” Tierney said, positioning Bloom Energy for sustained growth, which is attracting investors.
Many investors in green stocks will still have memories of watching the sector sink at the end of the pandemic. And even after this year’s recovery, clean-tech stock indexes are a far cry from the highs of 2020 and 2021, when interest rates were at critical lows and coronavirus lockdowns suppressed demand for traditional energy sources.
But this bull run feels different, according to some of the largest asset managers investing in the sector.
Natalie Admait, chief operating officer of Brookfield’s renewable power and transition division, said there is strong demand for low-carbon energy sources to power AI, “not only because they are cheap and abundant, but also because they can be brought online quickly.”
Brookfield Asset Management recently announced it has raised $20 billion as the world’s largest private fund dedicated to the clean energy transition. And Brookfield just agreed to invest as much as $5 billion to install Bloom Energy fuel cells in new data centers that will run AI.
There is a view within BlackRock that the Green Rebound could withstand an AI bubble.
“We are not correlating a potential ‘AI bust’ with the existential risk of sustainable energy stocks,” Charles Lilford, a BlackRock portfolio manager who oversees one of the asset manager’s flagship actively managed sustainability funds, told Bloomberg. “Sustainable energy stocks could further benefit as U.S. interest rates fall and the market broadens.”
Apollo Global Management is among the asset managers predicting a nearly unlimited need for energy to power data centers, with its outgoing chief sustainability officer saying the demand gap “will not close in our lifetime.”
Even in the United States, where President Trump’s anti-environmental sentiments dominate policy, low-carbon energy sources appear to be emerging as a popular option for powering data centers. And President Trump’s One Big Beautiful Bill turned out to be less punitive for U.S. solar and wind power than many investors initially feared. As a result, demand for clean energy is not necessarily driven by ideological views on climate change, but by economic interests.
“If you offer green electrons to a company, if you can promise them that they will have power when they need it, then they are agnostic about that,” said Timothy Ho, European utilities and renewable energy analyst at Amundi SA, Europe’s largest asset manager.
Guggenheim Securities analyst Joseph Osha said Trump’s policies remain “very difficult” for certain renewable energy sectors, such as residential solar projects. So the big rally in some clean tech stocks can best be explained as “a recognition that the business is viable,” he says.
For example, after posting triple-digit gains this year, Sunrun Inc. and SolarEdge Technologies Inc. “are still trading at a fraction of their historic highs,” Osha said.
Amundi’s Ho says the green sector still needs to be treated with caution.
Investors need to be aware that “when you have these broad thematic trends, you can get a little bit detached from valuations,” he says. And that means the market “could move a little bit away from fundamentals, at least temporarily.”
White, Alastair Marsh and Liu contribute to Bloomberg.
