Trump Tax Law Slashes Solar Stocks by 40% as Nuclear Energy Surges 26%

The recent passage of the Trump tax law has significantly impacted the renewable energy sector, particularly the solar industry. The law aims to accelerate the phase-out of clean energy tax credits, which were a cornerstone of the Biden administration's Inflation Reduction Act. This move has led to a sharp decline in solar stocks, with companies heavily reliant on these tax incentives experiencing substantial losses. For instance, Sunrun, a prominent player in the residential solar market, saw its stock plummet by nearly 40%. The law also affects the 48E investment tax credit, which was originally scheduled for a gradual phase-out but has now been expedited under the new legislation.

The impact on the solar industry is particularly severe, as the law reduces tax credits for homeowners purchasing solar systems. This has led to a significant drop in the value of the Invesco Solar ETF, which primarily invests in U.S. solar stocks, by 10%. Even the largest renewable energy developer in the U.S., NextEra Energy, saw its stock decline by 6.4%. Analysts warn that green energy stocks may continue to fall, as there are no clear catalysts to support their recovery. The focus of the government appears to be on phasing out green subsidies, which has raised concerns among investors.

In contrast, the nuclear energy sector has been spared from these cuts. Tax credits related to the nuclear industry have been exempted from reduction, and subsidies related to advanced manufacturing remain unchanged. This has led to a surge in nuclear energy stocks, with Oklo, a small modular reactor company, seeing its stock price rise by 8% during trading hours and an additional 18% in after-hours trading. The positive outlook for the nuclear sector is further bolstered by reports that Trump is set to sign a nuclear energy order, which has bolstered investor confidence.

The attention of investors is now shifting to the Senate, where the Republican-controlled chamber has the power to modify some of the more aggressive cuts to clean energy incentives. At least four moderate senators have expressed support for such adjustments. However, the overall sentiment remains pessimistic, as some Republicans who were expected to support the bill have not yet come forward. This uncertainty has led to a continued bearish outlook on the stock market.

The passage of this law marks a significant policy shift for the U.S. clean energy transition. While the Senate may adjust certain provisions, clean energy advocates warn that the legislation could still lead to a severe downturn in the industry. The future of the clean energy sector in the U.S. hangs in the balance as these policy changes unfold.