The solar-first stock rose more than 18% after analysts called it an artificial intelligence play

Key takeaways

First Solar was the worst performer on the S&P 500 for a second straight day on Wednesday, after UBS analysts raised their price target on the stock, citing its potential to benefit from big tech companies’ investments in artificial intelligence (AI).
Analysts suggest that Microsoft and other hyperscalers could rely on renewable energy companies like First Solar to meet AI demand and meet their carbon neutrality goals.
First Solar can also take advantage of tax breaks under the Inflation Reduction Act.

First Solar (FSLR) was the top performer in the S&P 500 for a second straight day on Wednesday, after UBS analysts on Tuesday said the company could benefit from the proliferation of energy-hungry data centers powered by artificial intelligence (AI).

“In our view, FSLR is an overlooked direct beneficiary of rising AI-driven electricity demand,” a team of analysts led by Jon Windham reportedly wrote.

Artificial intelligence consumes a lot of energy, and many of the big tech companies investing in it, such as Microsoft (MSFT), Amazon (AMZN), and Alphabet (GOOGL), have made carbon neutrality pledges.

Microsoft, which has pledged to become carbon neutral by 2030, last week reported that its carbon emissions in 2023 were 29% higher than in 2020, largely due to the company’s investments in data centers necessary to train and run artificial intelligence models.

“As part of their 100% renewable energy sustainability policy, large technology companies are aligning their non-renewable energy consumption with power purchase agreements (PPAs),” the analysts wrote.

First Solar, one of the largest U.S. solar technology companies, could benefit from this, especially if it is able to continue to increase its share in the domestic market, as UBS analysts predict. Analysts predict that spending on artificial intelligence, rising U.S. protectionism and tax breaks introduced by the Inflation Reduction Act could help lift First Solar’s earnings to nearly $37 per share in 2027 from $7.74 in 2023.

First Solar also got support from Piper Sandler analysts, who raised their price target on the company’s stock to $219 from $195 on Monday.

First Solar shares finished up more than 18% at $251.75 on Wednesday and are up more than 46% year to date.