President Donald Trump has taken a skeptical view of renewable energy since returning to the White House in January. That leads many investors to believe solar stocks could be on life support. However, the Trump administration surprised investors last month by deciding on a more sector-friendly framework for projects to continue receiving federal tax credits before they phase out.
Along with lower interest rates and artificial intelligence's voracious power needs, it's a new dawn for solar stocks.
Trump Budget Guidance Eases Fears
The stock market believed that Trump's "Big Beautiful" budget was a death knell for solar, with its cuts to clean energy and doubling down on fossil fuels. Tax credits phase out sooner than those for other technologies projects and have to either be completed by the end of 2027 or begin construction by July 2026.
However, solar stocks broadly advanced on Aug. 15 after the Treasury Department released new guidance. It made clear that, depending on the size, wind and solar projects can qualify for federal investment and production tax credits if "physical work" or a 5% investment has taken place by July 2026. Projects also have a four-year window from the beginning of construction to complete the project. Also, the guidance is not retroactive, so previous projects that started construction earlier are still eligible.
Previously, such projects were tax credit eligible if developers spent at least 5% of the planned cost.
Solar Stocks Jump
The 27 stocks in the IBD-tracked Energy-Solar industry group have collectively advanced around 15% since the guidance announcement. For the 2025 stock market, the solar group has gained just 4.9%, but that belies a strong 44% run since the end of April, gaining more than 13% in August alone. It's on track for a fifth straight monthly increase in September.
Nextracker CEO Dan Shugar, in an interview with IBD, said the industry was OK with solar tax credits going away as long as there was an "orderly transition" and that the projects already underway are still eligible.
"That's basically what happened," Shugar said, adding that even with solar tax credits going away, at the same time solar costs are going down and the cost of conventional power is going up.
The Nextracker CEO added that in three or four years, solar projects will not have tax credits but that "there will be a level playing field" and solar can compete on cost with other fuel sources.
"That's why you saw solar stocks go up after the Treasury guidance. Uncertainty was removed from the market and customers, for the most part, are saying 'they're good,'" Shugar said.
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Trump Risk Off The Table
With Trump's decision to maintain solar tax credits, a major risk has been lifted.
GLJ Research analysts on Aug. 15 proclaimed that the Treasury's guidance "couldn't be better news for the residential solar space." The firm noted that the stock market broadly believed that Treasury was going to make it impossible for residential solar companies to take advantage of the Biden-era tax credits in years to come, but that the Trump administration "did the opposite."
Meanwhile, Guggenheim analysts added last month that the Trump administration's guidance was good news for solar tracker suppliers such as Nextracker and Array Technologies, with these companies "positioned to benefit the most."
"Solar investors were surprised, relieved that Republicans did not fully repeal the IRA's solar incentives," Rene Reyna, Invesco's Head of Thematic & Specialty ETF Strategy, told IBD.
"That news resulted in an accelerated sort of recovery, if you will, as it just resulted in better outcomes," he added.
However, Reyna believes that moving forward it's all about interest rates when it comes to solar energy's outlook as AI data center buildout and soaring electricity demand also continue to support the sector.
Solar Stocks' Surprising Recovery
The Invesco Solar ETF broke out from a cup-with-handle base that dates back to June 2024, with a buy point of 40.35, according to MarketSurge charts. The ETF is now trading about 4% above that buy point.
Residential solar installer Sunrun broke out on Aug. 15 from a sloppy three-month consolidation. It soared nearly 57% during August's stock market, hitting a fifth straight monthly advance. Sunrun stock is now up 75% this year.
Meanwhile, solar-tracker provider Nextracker climbed 15.5% higher in August. Shares have been trading around the top of a buy zone from a traditional 67.87 entry.
Array vaulted 39% higher last month. It jumped above a traditional 8.19 buy point from a double-bottom base before reversing to around that entry.
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Solar Projects Pulled Forward
Israel-based solar panel inverter manufacturer SolarEdge Technologies surged 32% in August. It hit its highest levels since June 2024. SEDG stock notched a fourth consecutive monthly gain. But it has retreated around 11% in September. Year-to-date, SolarEdge has gained 120%.
First Solar, which manufactures and sells residential and commercial solar panels, gained nearly 12% in last month's stock market. Similar to SolarEdge, First Solar registered a fourth straight monthly advance, breaking out from a cup-with-handle buy point of 189.50 on Aug. 15. FSLR stock has gained more than 60% since the end of April and is up 17% for the year.
Invesco's Reyna said the Trump guidance is currently priced into solar names. However, if interest rates come down in a meaningful way, solar stocks could soar once more.
"Projects are being pulled forward at an accelerated rate that seems to be sort of priced in and so I think to some degree what that means is that the Treasury component is maybe benign at this point," Reyna said.
"The interest rate component, I think that is sort of going to be the next driver that will be a net positive within the space," he said.
Solar Demand Remains Robust
Even before the Trump administration released its guidance, with the broader stock market viewing solar energy as nearly dead for much of 2025, solar installation demand has held up this year.
The Energy Information Administration, or EIA, on Aug. 20 released data showing that U.S. developers added 12 gigawatts of new utility-scale solar electric generating capacity during the first half of 2025, with plans to add another 21 gigawatts in the second half of the year.
If those plans are realized, solar energy would account for more than half of the 64 gigawatts that developers plan to bring online in 2025, according to the EIA.
Reyna said that AI data center buildout could serve as another positive for the industry and that solar "could be a central solution there."
Nextracker CEO Shugar also sounded a bullish tone when it comes to how solar can serve AI data centers.
Shugar said that top hyperscalers like Amazon.com, Microsoft and Google-parent Alphabet have been large solar energy customers for years, with Nextracker "continuing to see that grow in terms of the power need from them."
He added that, overall, solar energy has seen "staggering" growth over the past decade.
"The solar story has been incredible," he said. "You hear a lot of noise but the bottom line is the market is very strong."
When Nextracker went public two and a half years ago it had a backlog worth around $2 billion. Nextracker reports that's swelled to more than $4.7 billion as of the latest quarter.
"Our demand has more than doubled in the last couple years and that's true for our sector. So the demand environment is very strong," Shugar said.
Not All Clear Skies For Renewables
However, solar stock rallies are never without risk. That is particularly true under the current White House.
Trump on Aug. 20 claimed on Truth Social that states that have built and rely on wind power and solar energy are seeing "record breaking increases in electricity and energy costs."
Trump added that it is "the scam of the century" and that "we will not approve wind or farmer destroying Solar."
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The president's comments could mean heightened scrutiny for renewable energy projects despite the Treasury Department's guidance. Already, the Trump administration issued a "stop-work order" for wind energy titan Orsted's Revolution Wind Project off the Rhode Island coast.
On Sept. 4, Orsted took legal action against the Trump administration in an effort to restart work on the project.
"We know the administration is sort of antisolar, or renewables let's call it," Reyna said, adding that this could be a hindrance to more robust utility scale solar installations.
But Nextracker remains optimistic.
"We grew under Obama, we grew more under Trump 1 then we did under Bush and we're growing more now and the reason for that is the fundamental economics of this technology," Shugar said.
Please follow Kit Norton on X @KitNorton for more coverage.
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