AI power demand could lift clean energy stocks

ACES and other clean energy stocks fell after oil prices dropped following recent ceasefire and peace-talk headlines, reversing earlier gains tied to a crude spike over the past month.

Year-to-date returns for clean energy equities and related ETFs have been positive, but prices weakened in the last month. The ALPS Clean Energy ETF (ACES) had benefited earlier from higher oil linked to conflict in Iran; headlines suggesting de-escalation pushed oil lower and added pressure to clean energy shares.

Rystad Energy highlighted a different demand source. “At the same time, rapid growth in AI-driven data centers has created a new source of power demand, driving strong gains in fuel cell companies,” the firm noted, pointing to rising electricity needs at large cloud operators and hyperscalers.

Hyperscalers require power that is reliable and cost-efficient. Utilities can take more than five years to obtain permits and build transmission to serve new data-center sites, creating a near-term window for on-site or nearby alternative power providers. Fuel-cell and other distributed-generation companies can deploy more quickly and compete for contracts where operators need immediate capacity.

Rystad said a broader rebound in ETFs such as ACES would require improvement across multiple clean-energy segments. The firm noted biofuels’ performance remains linked to oil prices, while fuel-cell valuations will depend on the scale of AI-driven power demand and actual project deployments. The battery sector faces overcapacity that needs stronger electric-vehicle demand to absorb excess supply; higher oil could improve EV economics but would need sustained fuel-cost differentials.

Financing conditions are another factor. If inflation falls and the Federal Reserve lowers interest rates, borrowing costs for capital-intensive clean-energy firms could decline and ease pressure on project finance. Rystad listed easing financing, stronger demand in lagging segments and continued alignment between energy security priorities and the energy transition as the factors investors will watch when assessing the sector after the recent pullback.