A mix of anxiety, fatigue, and exasperation — a kind of “green fatigue” has taken hold as the planet heats up faster than ever. But by pummeling renewable energy stocks following Trump’s election, the market may have made a serious mistake. At the beginning of the year, investors massively offloaded renewable energy stocks, sending valuations to historic lows. Since then, a rebound has taken shape, as it has become increasingly clear that artificial intelligence (AI) is closely tied to renewable energy. As renewable energy has become cheaper than fossil fuels in most parts of the world, a strong economic rationale and the growing electricity demand driven by AI point to an increasingly attractive future for renewables.
“Something I’ve never seen in 25 years”
Despite Donald Trump’s election and his tendency to favor fossil fuels, the energy transition is entering a new phase. Demand for affordable and efficient renewable energy is accelerating. “A greener planet needs more electricity from cleaner sources and more energy-efficient solutions,” explains Xavier Chollet, manager of Pictet AM’s Clean Energy Transition strategy.
The explosion in the number of data centers — which are extremely energy-intensive, not only to power AI processors but also to cool them — represents a major turning point in electricity demand and is driving the need for renewable energy sources.
Many solutions have been imagined and even tested, like launching data centers into space, where temperatures are frigid. Microsoft tried immersing data centers in the ocean depths, where the water is cooler, but high costs and ecological concerns put an end to that experiment. In Switzerland, a data center is being built beneath a new residential neighborhood to repurpose its heat to warm the homes above. These diverse efforts highlight a problem that is likely to become massive.
Electricity Demand Is Skyrocketing
As AI’s growth requires ever more powerful and electricity-hungry data centers, electricity demand is accelerating — growing four times faster than it did over the past 25 years. In 2018, U.S. data centers consumed about 2% of total electricity; by 2028, that figure could rise to 12%, and to 50% by 2040 if trends continue — a pace that is clearly unsustainable. This looming crisis has prompted an unprecedented focus on energy efficiency in tech solutions for AI, including semiconductors, in an effort to temper runaway electricity consumption.
Although this surge is primarily driven by the boom in AI-related data centers, it is also fueled by the broader electrification of the economy — the rise of electric vehicles, the reshoring of strategic industries to the West, and more.
Donald Trump has openly expressed hostility toward renewable energy, calling solar farms “horrible as hell” in a recent Fox News interview.
His signature domestic policy effort attempted to cut federal support for the transition to renewable energy while boosting fossil fuel production — sparking a stock market sell-off in the entire renewable sector, as investors suddenly, and wrongly, turned pessimistic.
Yet despite this denial — and to the surprise of many — renewables remain the top choice for new electricity production facilities. They are the cheapest and fastest to deploy. The reality contradicts the Trump camp’s vision: electricity shortages could soon become the main obstacle to AI’s expansion. Electricity demand is soaring. The challenge now is to add capacity as fast as possible.
Coal plants continue to shut down. Nuclear plants take 10 years to build and activate. Gas plants take five — and even then, there is currently a shortage of gas turbines. Any new order placed today would only be delivered by the end of 2029, notes Xavier Chollet. In contrast, solar panels and wind turbines can be installed in as little as 12 months. This fact no doubt clashes with the worldview of fossil fuel advocates across the Atlantic, especially as over 90% of new project applications for grid connection in the U.S. are now renewable-based.
The Challenge Ahead: Secure Supply and Boost Efficiency
The key challenge in the coming years will be not only securing access to renewable energy but also improving energy efficiency using low-consumption systems (such as AI processors developed by Broadcom or Marvell Technology). “Personally, in my 25-year career, I’ve never seen anything like this,” says Xavier Chollet. “AI’s growth is driving historic technological innovation in semiconductors and the push for energy efficiency — and the surge in electricity demand implies an acceleration of growth in the renewables sector.”
There are also strong economic reasons. The cost of building new wind or solar power plants is significantly lower than that of nuclear or gas-fired plants. The U.S. example is not particularly flattering: although solar power is twice as expensive there as in Europe, and shale gas is much cheaper, the cost advantage is now shifting decisively toward wind and solar, says Chollet.
Competitive Costs
“The problem is that solar doesn’t generate energy at night, unlike nuclear or gas plants. But increasingly efficient batteries are gradually overcoming that drawback.”
Supporting this trend, the International Energy Agency (IEA) estimates that between 2023 and 2026, 90% of new electricity generation projects will use renewable sources.
Cause for Irritation
Even if Trump shows a strong distaste for anything related to renewable energy, no president can override economic logic.
Ironically, during Trump’s first term, renewable energy stocks quadrupled while fossil fuel-related stocks were nearly halved.
Diversification is key in a renewable energy equity portfolio. Risky bets — such as the 2020 boom in hydrogen startups — have since lost steam. “You have to be very cautious with false starts in a fund,” says Chollet. “This sector hasn’t found its market yet and remains niche,” he adds, justifying why his fund has avoided these pitfalls. His strategy’s 18-year track record places it in the top quartile compared to competitors across all time periods.
The relentless rise in global temperatures — recently made all too real — reminds us of the urgent need to develop renewable energy.
Finally, the need for energy sovereignty and the low price volatility of renewables are two other compelling reasons to embrace them on a massive scale.
