It was a great week for U.S. clean energy stocks after the Biden administration announced new protections against foreign competition across energy products.
According to data provided by S&P Global Market Intelligence, Bloom Energy (BE -5.10%) was up as much as 27.7% this week, and American Superconductor (AMSC -1.59%) jumped 12.9%. The two stocks are up 27.5% and 12%, respectively, at 3 p.m. ET on Friday. Protections won't be great for every company though, and that's why Li Auto (LI -3.29%) was down 19% this week.
Biden's protection plan
We learned this month the Biden administration will put tariffs in place for all kinds of clean energy products from China. Solar cell tariffs will increase from 25% to 50%, and electric vehicle (EV) tariffs will go to 100%.
This caused a rush of trading in any company that could conceivably be seen as a beneficiary of tariffs. The problem is that Bloom and American Superconductor aren't profitable and haven't proven they can be even with protections.
BE Revenue (TTM) data by YCharts.
Li Auto, on the other hand, is going to feel the pinch from a smaller addressable market without the U.S. The company said this week it will delay new SUV models until 2025, and the price war in China doesn't seem to be stopping. Like a lot of Chinese EV stocks, the company faces multiple headwinds at the moment.
AI gives energy stocks a boost?
The other factor impacting Bloom Energy, and maybe American Superconductor to a lesser extent, is speculation about who will win as artificial intelligence (AI) infrastructure is built out. A Barron's roundtable picked Bloom as one of the biggest winners from the AI boom because the company can provide clean, on-demand power to data centers.
The market is in something of an AI frenzy, trying to figure out who will benefit from tens of billions of dollars being invested in AI right now. Energy will clearly see some tailwinds, and Bloom Energy has some valuable services to offer, but the stock rising this month because of AI seems like a stretch.
The future is not what it appears to be
Unfortunately, history says that a lot of this speculation won't amount to the desired outcome. Tariffs rarely lead to improved outcomes for U.S. companies as Chinese manufacturers will find ways around by manufacturing in other countries. We saw this play out for years as the government tried to play whack-a-mole on Chinese solar manufacturers to little success.
The speculation around AI is even more questionable. Yes, energy demand will rise because of AI usage, but it's not clear that Bloom Energy or any of the other hydrogen fuel cell companies have the economics right to make a profit from increased demand. And until they can make a profit, I'm hesitant to buy in.
This week's big clean energy moves were speculation, and I don't see much fundamental progress. That may change later in the year, but for now, I don't think this is a buying opportunity for investors.
