If you're searching for a way to power the artificial intelligence revolution, maybe you should just look up.
AI is gearing up to rewire the future, from powering autonomous vehicles to accelerating drug discovery and ensuring product safety.
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This all sounds terribly exciting — until the electric bill comes due. AI is going to need an awful lot of energy to work its industrial magic.
The International Energy Agency said in a recent study that data centers' total electricity consumption could reach more than 1,100 terawatts in 2026, roughly equivalent to Japan's electricity consumption.
“Updated regulations and technological improvements, including on efficiency, will be crucial to moderate the surge in energy consumption from data centers," the agency said.
And where to get that energy? Well, as the Beatles liked to say, here comes the sun.
First Solar (FSLR) is one company that has been getting a lot attention from analysts lately.
In a research note UBS analysts Jon Windham and William Grippen described the Temple, Ariz., solar-power-equipment maker as "an overlooked, direct beneficiary of increasing AI-driven electricity demand."
Image source: First Solar
Analysts see a direct line to AI
The analysts reiterated their buy rating and boosted their stock price target on the company's shares to $270 from $252.
AI uses roughly 10 times more electricity than traditional Google search, the analysts said, adding that there is a direct line from AI to First Solar.
"Under '100% Renewable' sustainability policies, the large tech companies match their nonrenewable electricity consumption through power-purchase agreements," they said, citing such tech powerhouses as Amazon (AMZN) , Microsoft (MSFT) , Meta Platforms (META) and Alphabet's Google (GOOG) .
The analysts say First Solar will continue to raise its market share in the U.S., seeing earnings per share surging to $36.74 in 2027 from $7.74 in 2023.
First Solar's "unique technology is ideally situated for two of the largest ongoing structural themes: Al-driven electricity-demand growth and increasing U.S. protectionism," they said.
"It is not a stretch to say that aside from FSLR, the entire rest of the global solar industry has consolidated over the past 15 years around China produced silicon-based solar modules," the analysts wrote. "Silicon has historically been viewed as the winning solar technology by the market, in our view."
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First Solar, however, makes thin-film solar modules that are not silicon-based.
While the company operates factories globally, Windham and Grippen said the majority of the anticipated earnings ramp is derived from the U.S. manufacturing expansion.
"The domestic manufacturing tax credit available under the Inflation Reduction Act and increasing U.S. import tariffs are driving a Made in America for America solar-supply chain," they said.
First Solar’s two main advantages "are speed to market and value proposition," they added.
On May 1, First Solar reported first-quarter earnings of $2.20 share, five and a half times the 40 cents a share of the year-earlier period and beating Wall Street’s forecast of $1.99 a share.
Revenue totaled $794.1 million, 45% higher than the $548.3 million of the year-ago quarter and beating analysts' estimate of $702.2 million.
Chief Executive Mark Widmar told analysts that "while we continue to play the long game, we must acknowledge the current environment in the solar manufacturing industry, which remains in a state of heightened volatility driven by intentional structural overcapacity in China."
White House makes important move
"The Chinese solar industry has engaged in a race to the bottom with a rationally low market-distorting pricing that has caused even Chinese companies to call for intervention by the Chinese government to manage the pricing environment and [end] the financial hardship this is causing them," he said.
Last week, the White House said it would remove the bifacial-module exclusion under Section 201 of the Trade Act of 1974. Bifacial solar panels capture solar energy from both sides. And the ones that are generally used in utility-scale solar projects are not currently subject to safeguard tariffs.
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Since this exclusion was implemented by the Trump administration, the White House said that imports of bifacial panels have surged and now make up nearly all U.S. solar-panel imports, undercutting the effectiveness of the Section 201 safeguard.
Removing the exclusion will “strengthen American solar manufacturing and protect businesses and workers from China’s unfair trade actions,” the Biden Administration said.
TheStreet Pro's James "Rev Shark" DePorre noted on May 23 that in December he had named First Solar as his top big-capitalization play for 2024.
"The stock has had a huge breakout Wednesday with the news that China is going to stop dumping cheap solar panels in the U.S." he said. "This is big news for First Solar, which is a large domestic producer."
In an earlier column, DePorre said his only concern was that a reelected Trump administration may put policies in place that may hurt the solar sector. "But First Solar's production is sold out through 2026 with over $23 billion in orders through 2030.
"There is no shortage of demand for what First Solar has to offer," he said.
Roth MKM analyst Philip Shen recently told investors that First Solar remained the key beneficiary in the firm's coverage universe.
The bottom line, Shen said, is that he continued to expect U.S.-made cells to be practically required to secure the 10% domestic content investment tax credit bonus, "likely to the dismay of much of the industry."
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