Since the start of August, clean energy stocks QuantumScape (QS -0.48%) and ChargePoint Holdings (CHPT 2.55%) are both up about 15%. Shares of hydrogen fuel cell maker Bloom Energy (BE 7.13%) have soared more than 30% in that time. Those returns were much higher going into this week, however. As of early Friday trading, these stocks were all down about 15% this week, according to data provided by S&P Global Market Intelligence.
These and other renewable energy stocks got a big boost in recent weeks after the U.S. Senate passed the Inflation Reduction Act (IRA), virtually assuring its passage in the House and its ultimately becoming law. That all came to fruition this week after President Biden did, in fact, make it a law that will invest more than $300 billion in clean energy. The stocks dropped this week, however, for several reasons.
The sweeping bill comes with various requirements for incentive funding, and investors are starting to parse those details. Bloom Energy dropped for its own company-specific reason, too. Management took advantage of the recent rise in the shares to issue new shares and raise more than $330 million in new capital.
QuantumScape has been making progress on its solid-state battery technology that could be a significant improvement for electric vehicles. It recently said it has successfully developed its first prototype 24-layer battery cell, which is a type of cell that could be commercialized. But while it still expects to have its pre-pilot production line in operation in 2023, the company likely won't see the start of commercial production until 2025.
The IRA could still be a tailwind for QuantumScape, as it should be for the EV sector overall. But there are also myriad requirements for some of the incentives. That includes price caps on the list prices of new electric cars, trucks, and SUVs for consumers to receive a $7,500 tax credit. It is also required for the production of batteries and components that some amount be processed in the U.S. or countries with which the U.S. has free trade agreements. That amount will increase for newer EV models as they are launched.
The bottom line is that any boost for companies in the EV sector will take some time to be realized. After the sharp increase in the stocks from the initial excitement over the news that the legislation had enough support to pass, some investors are taking profits for now.
Bloom Energy investors are also reacting to the dilution that will occur from the new share sales. The pricing for that offering has been announced at $26 per share. So it makes sense that the stock would drop to near that level, too.
For long-term investors, the IRA should have positive consequences. Boosting EV sales helps not only manufacturers and suppliers but also the charging station network companies like ChargePoint. That help is still far away, however, helping to explain the drops in these stocks this week.