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First Solar is uniquely positioned to benefit from rising electricity demand from artificial intelligence as Big Tech companies seek clean energy to power the proliferation of data centers, according to UBS analysts. First Solar’s earnings are expected to surge 374% to $36.74 per share in 2027, analysts led by Jon Windham told clients in a research note Tuesday. UBS has raised its stock price target for First Solar by $18 to $270 per share, implying upside of about 38% from Monday’s closing price. “In our view, FSLR is an overlooked, direct beneficiary of increasing AI-driven electricity demand,” Windham and his team told clients in their note. AI uses 10 times more electricity than traditional Google search, according to UBS. As electricity demand from AI grows, Amazon, Microsoft, Meta and Alphabet’s Google unit have committed to buying renewable power that matches their consumption. Utility-scale solar represents 80% of the corporate power purchase agreements over the past five years, and the four tech companies represent 40% of utility-sale solar demand, according to UBS. First Solar’s share of the utility-scale market has grown to 35% in 2022, up from 15% in 2018, the bank found. U.S. protectionism, IRA benefits UBS previously viewed First Solar as a high-cost domestic solar module manufacturer that was disadvantaged against low-cost suppliers in China, which dominates the global solar market and supply chain. But the U.S. imposition of tariffs on China and domestic manufacturing tax credits under the Inflation Reduction Act make First Solar look increasingly attractive, according to UBS. “Many (including ourselves at times) viewed FSLR as a fundamentally flawed technology,” Windham told clients. “We believe that is the wrong framework in today’s world.” First Solar makes thin-film solar modules rather than silicon-based modules that are dominated globally by China. While this may have been a liability in the past due to costs, First Solar now has a competitive technological advantage as U.S. protectionism targets Chinese silicon modules, according to UBS. First Solar is vertically integrated with its own supply chain, sourcing only glass and some raw materials from other suppliers. This will allow the company to ramp up production capacity faster than competitors that rely on a fragmented supply chains, according to UBS. The bank forecasts First Solar’s production capacity will surge from 3.9 gigawatts last year to 13.1 gigawatts by 2030. First Solar manufacturers most modules at its plant in Ohio with plans to triple capacity with new factories planned in Alabama and Louisiana. This will allow First Solar customers to benefit from the 10% domestic content tax credit under the IRA, which is worth about 10 cents per watt of solar power. “In addition, in our view FSLR is thought of as a ‘de-risked’ product compared to the ever-expanding U.S. tariff cases imports face,” Windham said. “FSLR is also a hedge against potential weakness in the ‘sustainability’ of the Chinese silicon based solar supply chain.” Goldman Sachs is also bullish on First Solar after the company reported a strong first quarter, raising its price target to $268 which implies 36% upside from Monday’s close. First Solar CEO Mark Widmar told analysts on company’s earnings call that he is seeing a “meaningful increase in demand expectations driven in part by data center load growth.” Chief financial officer Alexander Bradley said First Solar will be “the favored supplier to the projects that are going to be supplying power to these data centers.”
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