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Green Energy

Green Energy Boom Is Fueling Bubble Fears
April 25, 2021

The market froth propelling clean and Green energy technology stocks has delivered billions of dollars of trading profits to investors across the globe and led to the creation of dozens of funds designed to prosper from the surge in prices.
Whether it’s electric-vehicle makers like Tesla Inc. and its lesser-known rivals, or companies such as Quantum Scape Corp. that are developing next-generation lithium-ion batteries, or solar-panel manufacturers like Enphase Energy Inc, these stocks have almost all gone in one direction, and that’s highe level.
The gains have been absurd, with several clean and green energy stocks still up more than 100% since the start of 2020 . Most of the companies’ shares are priced as if they’re all going to be long-term winners, while the reality is that some of the companies probably will go out of business before too long. Quant pioneer Rob Arnott co-wrote a report published in March that called the rally in EV stocks just a “big market delusion.
Green’s Carbon Bubble series seeks to capture how investors are navigating the market’s ebullience. While there’s no doubt climate-tech is a hot, growing asset class, there’s also little question that some investors are going to get burned by chasing companies with excessive market valuations and questionable product offerings.
Key Coverage
Covid Shock and Ark Effect to Spur $1 Trillion Boom in ESG ETFs
BlackRock’s Record-Breaking ESG Fund Looks Just Like a Big Tech ETF
Wall Street Math Shows ESG Funds Can Ride the Value Stock Boom
By The Numbers
• 145%
The surge in the WinderHill Clean Energy Index since the start of 2020
$1 Trillion
Wind and solar asset financing since 2016
$2.2 Billion
This year’s net inflow into the iShares Global Clean Energy ETF
Why It Matters
Governments, companies and other organizations have raised more than $375 billion since the start of 2020 selling bonds where proceeds are earmarked for “green” projects; investors have plowed more than $20 billion into U.S. exchange-traded funds that track the clean-energy markets; and a venture fund led by billionaire philanthropist Bill Gates is committing billions of dollars to the sector. Funding for battery companies and electric-vehicle companies has skyrocketed, and investment in solar and wind energy keeps increasing. These are just some of the financial factors.

The deluge of money flows has raised questions about whether it’s a market bubble. Some say the rapid rise in valuations is a clear sign of overpricing, while others say the markets are bound to bounce around, but the underlying clean-energy technology is improving all the time and is here to stay.

Santos Editorial

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