The election of Donald Trump has led to a sell-off in renewable energy and electric vehicle stocks. Investors are worried about the potential repeal of clean energy incentives introduced under the Biden administration’s Inflation Reduction Act, along with Trump’s tariff and tax cut policies. However, this market downturn may present investment opportunities in high-quality industry leaders.
There are signs that clean energy stocks might not be hit as hard as initially feared. Many ongoing clean energy projects are in red districts, with about 75% of the IRA’s spending and job creation happening in red states or red counties in blue states. This bipartisan benefit could help prevent a full repeal of IRA incentives.
Recently, 18 Republican lawmakers sent a letter to House Speaker Mike Johnson, warning against completely dismantling the IRA due to its positive impact on their districts. Elon Musk, a major Trump supporter, also advocates for clean energy and will likely influence how the administration handles IRA incentives. Despite the recent market volatility, Enphase Energy remains a leading and profitable company in the clean energy sector.
Election impact on clean energy stocks
The company’s microinverter technology enhances the efficiency of solar power systems and sets it apart from competitors. Enphase has been proactive in cutting costs and preserving profitability.
With its stock now trading at just 18.5 times next year’s earnings estimates and the price back to 2020 levels, Enphase presents a potential opportunity for contrarian investors. Rivian, another leader in the clean energy space, saw a stock sell-off following Trump’s election but has since rebounded due to positive updates in its third-quarter earnings. The company recently signed a significant deal that will yield up to $5.8 billion through 2027, helping fund its 2026 launch of the R2 SUVs.
Rivian has made notable progress in lowering raw material costs and capital expenditures and anticipates a positive gross margin in the fourth quarter. This positions Rivian well to weather uncertainties around interest rates and potential policy changes under the new administration. While the election of Donald Trump has sparked concerns for clean energy stocks, the underlying strengths of companies like Enphase Energy and Rivian may present attractive opportunities for investors.
Both companies have robust strategies in place to navigate the current market challenges and emerge stronger in a potential upcycle.
