After watching wind and solar stocks plummet in the hours after Donald Trump’s election victory, asset managers are zeroing in on a corner of the green transition they say will defy the president-elect’s anti-ESG agenda: the grid.
One day after the election, analysts at TD Securities told clients that grids and the equipment needed to build them now represent one of “the best-positioned energy transition sub-sectors.”
It’s a call that’s already paying off. Since the Nov. 5 election, a key stock-market gauge of the equipment that goes into grids is up about 6%, while the broader S&P Global Clean Energy Index has lost roughly a tenth of its value. Suppliers in Asia and Europe that get sizable chunks of their revenue from the American market also have rallied, with Japan’s Hitachi up more than 6% in the same period.
Money managers say investing in U.S. power and grids is a way to dodge the fallout of tariffs that will hurt other sectors. And as Trump’s protectionist policies look set to force more manufacturing back into the U.S., American demand for energy is set to soar, adding to the investment case.
“We’re really bullish on U.S. power demand,” said Ran Zhou, portfolio manager at New York-based hedge fund Electron Capital Partners. “And associated with that is long-term carbon-free energy.”
Companies developing grid equipment that have seen their share prices rise since the Nov. 5 election include Eaton, Rockwell Automation and Ametek, which are all up more than 6%. Emerson Electric Co. has added more than 7%.
Companies tied to electrical grids were already outperforming other corners of the green sector well before the U.S. election, with the NASDAQ OMX Clean Edge Smart Grid Infrastructure Index up 20% last year. But a bigger U.S.-based manufacturing sector driven by Trump’s tariffs looks set to trigger a new growth wave for US grid stocks, according to asset managers interviewed by Bloomberg.
Trump has made clear he wants to rescind unspent funds from the Biden administration’s signature climate law, the 2022 Inflation Reduction Act. And his pro-fossil fuel stance has fueled a panic among green investors that a Trump White House will stunt the development of renewable energy projects in the US.
But at the same time, the president-elect has promised U.S. companies access to cheap electricity, something which analysts say isn’t possible without building out renewables.
The changes underway in U.S. energy policy coincide with an historic surge in demand. Wood Mackenzie, a consultancy, estimates the U.S. is now facing the biggest energy consumption bump in several decades, with growth expected to be as high as 15% in some regions over the next five years.
Much of that demand will come from technology companies building data centers to fuel the development of artificial intelligence. Amazon.com, Alphabet’s Google and Microsoft have each announced nuclear deals in recent months, with the aim of powering their operations with carbon-free generation.
