Our theme of Hydrogen Economy Stocks, which includes the stocks of U.S. listed companies that sell hydrogen fuel cells, related renewable energy equipment, and supply hydrogen gas, has had a tough year, declining by about 26% year-to-date, compared to the S&P 500 which has gained over 16% over the same period. While the hydrogen theme outperformed over 2022, driven by the passage of the Inflation Reduction Act in the U.S., and an increasing urgency to reduce the dependency on fossil fuels following Russia’s invasion of Ukraine, some factors have hurt the theme of late.
Interest rates have surged, with the effective federal funds rate in the U.S. standing at about 5.33%, more than 2x levels seen in September 2022, following the Fed’s interest rate hikes. Higher interest rates are making it more expensive to finance renewable energy projects and are turning investors away from loss-making, futuristic stocks including many hydrogen players. Moreover, earnings from hydrogen fuel cell players have been lackluster. While FuelCell Energy saw revenue for Q2 2023 more than double, Q2 net loss widened to $35.1 million from a loss of $31 million in the year-ago period. The company’s backlog also fell 23% year-over-year to $1.02 billion. Bloom Energy
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