First Solar: Another Company Benefiting From The AI Rally

In the US stocks market, the Electronic Technology sector continues to lead the competition, with YTD gains of nearly 60%. Such impressive performance has been mainly driven by proliferation of AI (among companies which have benefited from this AI rally are chipmaker Nvidia and Micron Technology, chip designer Arm Holdings etc), in addition to optimism towards interest rate cuts by the Fed (though latest Fed meeting signaled only one rate cut this year, then four rate cuts next year).

Other than chip-making, another company which benefited from the AI rally is First Solar.Inc. It is a solar technology company which engages in the design, manufacture, and sale of solar modules, which convert sunlight into electricity (a vital component that fulfills the power demand of AI datacenters). To date, First Solar Inc has become the world’s largest thin-film solar module manufacturer, with production lines in United States, India, Malaysia and Vietnam.

Data Center Power Demand. Source: Goldman Sachs

The widening use of AI will imply an increase in the technology’s consumption of power. According to Goldman Sachs, between 2023 and 2030, data center power consumption from AI is estimated to be 200 terawatt-hours per year. By 2028, the AI is expected to represent about 19% of data center power demand.

In general, one of the strengths of First Solar include its innovative approach to solar energy production, by integrating thin film Cadmium Telluride (CadTel) photovoltaic (PV) technology, that generally costs less, as well as allowing superior scalability and a higher theoretical efficiency limit. Other than that, a call for providers to shift away from pricing wars by China’s solar regulatory agency recently has served as another tailwind for First Solar.

First Solar: Income Statement Evolution (Annual Data). Source: Market Screener

There was a significant improvement in First Solar’s financial performance in FY 2023 compared to previous years. Sales revenue was up over 26% (y/y) from the previous year, to $3.32B. It also managed to turn both operating profit and net income from negative to positive, at 893 million and 831 million respectively. Operating margin and net margin were at 26.90% and 25.03%, as opposed to the previous year’s -1.04% and -1.69%. Prospects remain bright for the company. According to projections by S&P Global Market Intelligence, by 2026, First Solar is expected to reach $6.7B in sales revenue and $3.2B in net income, while operating margin and net margin are expected to rise higher, at 52.94% and 47.67% respectively.

Technical Analysis:

#FirstSolar, Weekly: The chart above displays that the #FirstSolar share price traded in a strong uptrend, after the asset broke the previous ATH ($231.81, now support level) in mid-May. It continued to extend higher last week, leaving the new ATH at $306.60. Together with $301.40 (FE 100.0%), these two points form the nearest resistance zone to watch. MACD indicator remains in positive territory, however the stochastic oscillator has just formed a dead cross at the overbought zone, which may indicate a diminishing bullish momentum at the moment. A price retrace could lead the asset to test $231.81 and $235.60 (FE 61.8%), followed by $170 and dynamic support 100-week SMA.

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Larince Zhang

Market Analyst

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