Why Solar Stocks Are Crashing Today—and Why It Could Be a Buying Opportunity

The solar sector is in freefall, with shares like Sunrun (SUNR) plummeting 41% and Array Technologies (ARRY) down nearly 9% as of May 22, 2025. The immediate culprit? The U.S. House’s narrow passage of President Donald Trump’s tax-and-spending bill, which aims to strip renewable energy tax credits and slash green incentives. But beneath the panic lies a critical inflection point for investors: a policy-driven sell-off that could create a once-in-a-decade buying opportunity—if the Senate revises the bill. Let’s dissect the chaos.

The Catalyst: Tax Credits on the Chopping Block

The House bill’s proposed elimination of the 30% residential solar tax credit and accelerated phaseout of wind/solar credits has shattered investor confidence. The vote passed by a razor-thin margin—51-50—highlighting the fragility of bipartisan support for clean energy. For context, the Inflation Reduction Act (IRA) of 2022 had already reduced the solar tax credit to 26% by 2023, but this bill would slash it further, destabilizing a $140 billion U.S. solar market.

The market’s reaction is visceral: Sunrun’s 41% plunge reflects its reliance on residential rooftop installations, while Array’s drop underscores fears over its $644 million debt load and negative EBIT margins (-18.5% in Q1 2025). Yet this panic may be overdone.

The Policy Crossroads: FEOC Rules and Supply Chain Nightmares

The bill’s most insidious provision isn’t the tax cuts—it’s the proposed expansion of Foreign Entities of Concern (FEOC) rules. These rules would bar solar projects using components linked to “adversarial” nations like China from receiving tax credits. Given that 80% of global solar manufacturing is in China, this amounts to a de facto supply chain ban.

The Solar Energy Industries Association (SEIA) warns this could erase 145,000 GWh of solar generation by 2030 and cost 300,000 jobs. But here’s the catch: the FEOC rules are still in draft form. Senate negotiations could soften the language, preserving incentives for projects using U.S.-made panels. Investors who position now may profit if lawmakers backtrack.

The Contrarian Case: Demand is Still Rocketing

While policy uncertainty looms, the underlying drivers of solar demand are unshaken. Data centers (projected to grow to 44 GW by 2030), AI supercomputing farms, and carbon capture projects all require 24/7 clean energy. Even with tariffs, the cost of solar power has fallen 90% since 2010. The Senate’s potential revisions could re-ignite a sector primed for explosive growth.

State-Level Salvos: Where the Action Is

While Washington fumbles, states are stepping up. California’s revised community solar program, Illinois’s 15 GW energy storage mandate, and Missouri’s cost-reduction pilot show how localized policies can bypass federal gridlock. Investors should prioritize firms with exposure to these programs—like SunPower (SPWR) or NextEra Energy (NEE)—which are less reliant on federal incentives.

Technical Indicators: When to Dive In

The sell-off has created extreme valuations. Enphase Energy (ENPH) is down 19% to a 52-week low of $19.70, while SolarEdge (SEDG) trades at 10.5x forward earnings—below its 12-year average of 15x. A bounce could come if the Senate strips the FEOC provisions, which looks increasingly likely given backlash from red-state solar manufacturing hubs.

The Bottom Line: A Policy-Driven Buying Opportunity

This isn’t just a sector correction—it’s a generational pivot. If the Senate moderates the bill, solar stocks could rebound sharply. Even if it passes as is, the long-term trend is undeniable: clean energy is the infrastructure of the AI era. Investors who buy the dip here may look back years from now and say, “That’s where I got rich.”

Act now. The Senate’s markup begins next week.