Why Solar Energy Stocks Plunged By 20% or More

Investors will need to brace for more downside in solar energy firms. On Thursday, the U.S. House passed a “big beautiful” Trump bill that cut clean energy subsidies.Markets did not expect the bill would end so many of the subsidies. Watch out for Emphase Energy (ENPH), which lost nearly 20% yesterday. NextEra Energy (NEE), AES (AES), First Solar (FSLR), Array Technologies (ARRY), and Sunrun (RUN) are among the solar energy stocks to beware of.The firms previously benefited from funding from the Biden Administration’s Inflation Reduction Act. They will now see grants for cutting air pollution and greenhouse gas emissions repealed.Investors should infer from the removal of the 30% federal tax credit for those who install solar rooftop solutions. It will hurt electric vehicle stocks since buyers expect to get subsidies and tax credits phased out. Rivian Automotive (RIVN) and Lucid Group (LCID) might pull back from here. However, this might depend on the rally in Tesla (TSLA) stock losing its momentum.Your TakeawayThe U.S. government needs to reduce its $36 trillion debt. It does not have the means to subsidize an industry that loses money. Conversely, the U.S. market will miss out on the cheapest energy source. Industries like the data center will need to rely on more expensive energy sources instead.For now, avoid investing in the solar energy sector.