Many people think of the Nasdaq Composite (^IXIC 0.79%) as concentrating almost entirely on tech stocks. After all, the biggest and most influential companies in the index are tech giants, focusing on everything from hardware and software for computers and mobile devices to making the internet a more efficient and information-filled place for users.
Yet companies in other areas of technology are also plentiful on the Nasdaq. Today, Plug Power (PLUG 2.15%) and FuelCell Energy (FCEL 2.95%) were sharply higher, showing investor interest in technology that allows the use of fuel cells for electrical generation in vehicles and for other applications. Here's why Plug Power and FuelCell Energy did particularly well, and how they helped lift the Nasdaq to gains of more than 2% on Thursday.
South Korea plugs in
Plug Power's 28% jump came as a result of a strategic alliance that the company made late Wednesday. South Korea's SK Group will become a significant investor in Plug Power, with the hope of obtaining technology to help make its industrial manufacturing more efficient.
Image source: Getty Images.
The purpose of the alliance is to expand the hydrogen economy more quickly throughout Asia. The South Korean government released its Hydrogen Economy Roadmap two years ago, setting ambitious goals between now and 2040 for building out capacity and infrastructure for supporting the industry.
In particular, South Korea hopes to produce 5 million tons of hydrogen annually, with more than 6 million fuel-cell electric vehicles, 1,200 refilling stations, and 15 gigawatts of total fuel-cell power generation capacity. All told, that should make hydrogen a $40 billion business in the next 20 years.
Under the terms of the deal, SK will invest $1.5 billion to obtain a nearly 10% stake in Plug Power. The equivalent stock price of about $29 per share is a bargain compared to the $35 closing price on Wednesday, but investors are still excited by the opportunities that having SK in Plug's corner will bring.
A better look closer to home?
Meanwhile, FuelCell Energy (FCEL 2.95%) also enjoyed substantial gains. The stock climbed more than 20% on Thursday afternoon.
The move came despite rather tepid comments from stock analysts at Jefferies. They noted a rise in investor interest for fuel cell stocks generally. But they started their coverage of FuelCell Energy with a rating of hold, and the $11 per share price target was well below where the stock closed the previous day, let alone its post-jump price.
Broadly, investors have been hopeful about a change in energy policy from the federal government. Democratic leaders have historically been more enthusiastic about looking for alternatives to fossil fuel energy infrastructure. There are plenty of renewable energy competitors for hydrogen fuel cell tech, such as solar and wind power. Yet government policy has tended to lump alternative energy methods into a single bucket, and that could bring more opportunities for FuelCell Energy, Plug Power, and other players in the fuel cell space.
It seems inevitable in the long run that renewable energy sources will predominate over fossil fuels, especially if reserves wane and climate issues become paramount. That's a long-term tailwind for fuel cell stocks, even though investors in Plug Power and FuelCell Energy have already waited a long time for their potential to become reality.
