Grid tech stocks flourish as market sees value past AI

The sector is poised to soar even further amid some investor fears about a bubble.

- BY Coco LIU, ISHIKA MOOKERJEE AND NAUREEN S. MALIK

ANADOLU Getty Images WIND TURBINES in Livermore. Many factors are driving energy demand, making grid tech attractive.

While some corners of energy markets have looked pretty frothy lately, one segment has Wall Street betting it won't get trapped in a bubble: grid tech stocks.

Despite sectorwide gains of some 30% this year, grid tech stocks remain an attractive target, according to Steve Tusa, managing director and senior equity analyst at JPMorgan Chase & Co. Grid tech encompasses a range of hardware makers and software developers as well as utility-scale battery installers. Tusa says investors would be well advised to take advantage of small dips in share prices.

"Any pullback is a buying opportunity at this stage," Tusa said.

Take Vertiv Holdings Co., which provides microgrid and energy storage solutions to data centers. While the company's stock price is up around 60% this year and the stock is trading at a "pretty significant premium" to the S&P, the company's growth "justifies" the premium, he said.

Other grid tech stocks also experienced large gains, mirroring the data center boom. Korean transformer manufacturers Hyosung Heavy Industries Corp. and LS Electric Co. have led those moves, soaring 400% and 230%, respectively, this year. In the U. S., inverter system maker SolarEdge Technologies Inc.'s stock has more than doubled in value, while engineering firm Willdan Group Inc. is trading just off record highs.

"It's not just about AI," said Tim Chan, head of sustainability research for Asia Pacific ex Japan at Morgan Stanley. "Energy demand as a whole is growing."