Trump's tax cuts tax deductions, U.S. photovoltaic stocks plummet, nuclear power stocks rise

Source:** Wall Street Insights  

Trump's new tax cut bill has dealt a heavy blow to the clean energy industry, with more aggressive-than-expected subsidy cuts causing a steep collapse in the photovoltaic sector.  

On Thursday, Trump’s tax cut bill passed the Republican-controlled House of Representatives by a narrow margin, immediately triggering a sharp decline in U.S. renewable energy stocks. According to media reports, the bill seeks to end clean energy tax credits ahead of schedule—credits that were a core pillar of the Biden administration’s Inflation Reduction Act (IRA).  

The residential solar industry was hit particularly hard. The bill’s original draft on May 12 cut tax credits for homeowners purchasing solar systems. The investment tax credit known as 48E was originally set to phase out later, but the latest version of the bill accelerates the reduction of subsidies for commercial installations.  

By the close of U.S. markets on Thursday, the net asset value of the Invesco Solar ETF, which tracks U.S. solar stocks, plummeted by 10%. Sunrun, which relies heavily on 48E eligibility, plunged nearly 40%, while NextEra Energy, the largest U.S. renewable energy developer, closed 6.4% lower.  

Analysts warn that green energy stocks may fall further. Manish Kabra, Head of U.S. Equity Strategy at Société Générale, said:  

*“There’s no obvious catalyst or reason to hold (U.S.) solar companies anymore. Concerns have been building, and we’re realizing that one of this administration’s priorities is to eliminate green subsidies.”*  

Nuclear power stocks remain unscathed as investors turn their focus to the Senate  

In this major shift in energy policy, fossil fuel lobbying groups celebrated the bill’s passage, with the American Petroleum Institute calling it a step to “restore U.S. energy dominance.”  

Notably, tax credits affecting the nuclear power industry were exempted from cuts, and subsidies related to advanced manufacturing remained unchanged. Oklo, a small modular reactor company backed by Sam Altman, saw its stock rise 8%. After-hours, reports that Trump would sign a nuclear energy order sent Oklo’s shares surging an additional 18%.  

The report notes that investors are now turning their attention to the Republican-controlled Senate, which has the power to water down some of the most radical clean energy incentive cuts. At least four moderate senators have expressed support for such adjustments. However, JPMorgan analysts speculate that investor pessimism about the stock market may persist, as some House Republicans previously expected to support the bill did not come forward.  

Analysts argue that while the Senate may tweak certain provisions of the bill, clean energy advocates warn the legislation could still lead to a severe recession in the industry. For the U.S. clean energy transition, this represents a significant policy turning point.  

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