Analysts argue that electrical grids and the equipment required to build them are a well-positioned subsector in the energy transition space. They believe that the grid will defy incoming president Trump’s pushback against investments directed towards sustainability and ESG regulatory frameworks.
Hours after Trump won, renewable energy stocks plunged then a day later, the market gauge of equipment required for grids rose by almost 6%. Firms that develop grid equipment have since recorded increases in their share prices, with Ametek Inc., Rockwell Automation Inc., and Eaton Corp all seeing over 6% increases. Emerson Electric Company also saw its share price increase by over 7%.
Suppliers in Europe and Asia who generate most of their revenue from the U.S. market have also recorded positives, with Hitachi Limited rising by almost 6% since the elections. In addition, the S&P 500 has seen its value increase by roughly 1.5% while the Global Clean Energy Index lost roughly one-tenth of its value following the elections.
Asset managers posit that having a bigger manufacturing sector in America may set off a growth wave for American grid stocks. It is expected that upgrades to the grid will benefit equipment manufacturers around the world, with the managers noting that investing in American grids and power may also minimize the negative effects of tariffs to be imposed under the new administration.
Under President Biden, the development of electrical grids received over $30 billion from the federal government. This is expected to increase under the incoming administration.
Trump revealed in the past that he aims to revoke unspent funds from the 2022 Inflation Reduction Act, a law focused on investing in the domestic production of energy, the promotion of clean energy and decreasing the federal government’s budget deficit.
He is also expected to increase domestic manufacturing, which means that the demand for energy may surge even more. Already, America is recording its highest consumption of energy in decades, with experts expecting the demand to grow by over 15% in some places over the next 5 years. Most of this demand will come from tech firms putting up data centers to facilitate AI’s advancement.
Microsoft Corp., Alphabet Inc.’s Google, and Amazon.com Inc. have publicized their nuclear deals, along with their objective to power operations with carbon-free energy.
Electron Capital Partners LLC Portfolio manager, Ran Zhou, explains that the bullish demand for U.S. power is linked to carbon-free energy in the long-term. Trump is pro-fossil fuels, a stance that has raised concerns among green investors, with some fearing that his administration may impede the development of renewable energy projects in America.
Companies like Aston Bay Holdings Ltd. (TSX.V: BAY) (OTCQB: ATBHF) that are focusing on the extraction of minerals necessary to growing the renewable energy space while adhering to ESG principles are unlikely to be fazed by the fears about policy reversals in the U.S. since they commodities they focus on can be used for other purposes if the energy transition slows down.
NOTE TO INVESTORS: The latest news and updates relating to Aston Bay Holdings Ltd. (TSX.V: BAY) (OTCQB: ATBHF) are available in the company’s newsroom at https://ibn.fm/ATBHF
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