There’s fear that if Donald Trump wins the 2024 presidential election, he’ll repeal the Inflation Reduction Act (IRA), which would damage green energy stocks. But that’s not likely to happen.
However, that’s not likely to happen.
For one, the IRA has been popular in states from across the political spectrum. Two, CEOs like Shell’s (NYSE:SHEL) Wael Sawan recently spoke out in favor of the IRA, noting, “The bipartisan infrastructure law and Inflation Reduction Act “seems to be working in terms of attracting a significant amount of capital in different states, whether it’s a red or blue state,” as quoted by Politico.com.
Two, Morgan Stanley argued that a full-scale repeal of the IRA is unlikely even in a Republican sweep. Instead, the firm sees “domestic manufacturing, nuclear power and wind and solar tax credits enjoying bipartisan support, reducing the risk of repeal regardless of administration composition, with no change to the IRA or the pace of clean energy development.”
Third, unless there’s a Red Wave in Congress, the IRA and related stocks will be fine.
That being said, I’d buy recent weakness in green energy stocks that dropped on the latest fear, including:
First Solar (FSLR)
Weakness in First Solar (NASDAQ:FSLR) is a buy.
It’s already starting to pivot higher after gapping from about $240 to $210. Last trading at $221.25, I’d use that weakness as a buying opportunity. For one, fears of an IRA repeal are a bit overblown.
First Solar is a potential beneficiary of the artificial intelligence data center boom. According to UBS analysts, First Solar is “uniquely positioned” to benefit from rising electricity demand from AI as Big Tech looks to clean energy to power data centers.
Those two substantial catalysts could easily help FSLR refill its bearish gaps. About 18 analysts rate First Solar as a moderate buy with an average price target of $284.56. The highest price target at the moment is $356.
Technically, First Solar is again oversold on RSI, MACD and Williams’ %R. The last time these indicators were this low, FSLR ran from a low of about $140 to a recent high of $306.77. I’m looking for FSLR to initially refill its bearish gap at $239.23 with a potential retest of $306.
Cameco (CCJ)
Weakness in uranium stocks, like Cameco (NYSE:CCJ) is also a buy opportunity.
For one, there are still severe supply and demand issues. For example, “Around 90 nuclear power plants are being planned, 61 are under construction and decommissioned nuclear reactors are being revived,” says Swiss Resource Capital.
On the other side, supply is about to get tighter, especially with the Russian uranium ban starting on August 11. After all, a ban on Russian uranium imports will easily shake up the global market and could send prices back above $100 until more supply is online.
Uranium stocks also benefit from increased extraction taxes in Kazakhstan, the world’s biggest uranium-producing country. On Jan. 1, 2025, the tax will rise from 6% to 9%. By 2026, newer taxes will be determined by production volumes. This could discourage increased production and drive up concerns about future supply.
iShares Global Clean Energy ETF (ICLN)
Or, we can diversify with green energy stocks with an exchange-traded fund like the iShares Global Clean Energy ETF (NASDAQ:ICLN).
With an expense ratio of 0.41%, the ICLN ETF offers exposure to companies that produce energy from solar, wind and other renewable sources. Some of its top holdings include Enphase Energy (NASDAQ:ENPH), First Solar, SolarEdge (NASDAQ:SEDG) and Vestas Wind (OTCMKTS:VWDRY).
What’s nice about this ETF is that it offers broad exposure to 102 clean energy holdings at a low cost of $13.86. In addition, with the Federal Reserve on course to cut interest rates, fading fear of an IRA repeal, and growing AI data center power demand, it should positively affect ICLN and its 102 holdings.
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.