By Avi Salzman
Stocks of battery makers -- even ones known for making other things, like Ford Motor -- are in a remarkable rally, one that could change the nation's electric grid.
Investors eager to tap into the battery boom, however, should tread carefully.
Tech companies and utilities are rushing to build multi-acre battery installations that can store power for artificial-intelligence data centers and other electricity needs. The trend has lifted stocks from Ford, which rose 44% in May after announcing a new battery storage division, to upstart battery-maker Fluence Energy, which jumped 44% on Monday alone because of a collaboration involving Nvidia.
Battery manufacturing stocks have several red flags that would normally make them weak investments. The industry is dominated by Chinese firms, which can make battery packs for much less money than American competitors. And the lithium-based battery product that each company puts out looks similar. These kinds of commoditized industries tend to succumb to price wars: The lowest-cost producer "wins" by destroying the entire industry's margins.
But a few factors have changed the calculus, causing demand for U.S. battery systems to surge and potentially keeping margins elevated.
The first is government policy. China may have the cheapest batteries in the world, but they're not so cheap to import. The U.S. has imposed broad tariffs on Chinese batteries that can add more than 80% to the base price. In addition, President Donald Trump's big 2025 tax bill kept in place subsidies for domestic battery manufacturing that can be worth $45 per kilowatt-hour -- accounting for 25% or more of the cost of the battery. The bill also expanded the ways those batteries can be used to receive subsidies. The tariffs and subsidies combined make U.S.-made batteries cost-competitive with Chinese ones.
The other big reason the battery industry is doing so well is the surge in electricity demand in the U.S., particularly driven by data centers.
Batteries have traditionally been placed at the site of solar and wind installations, and have been designed to store the power those technologies produce. They power up when the sun is shining or the wind is blowing and then discharge that power when the sun sets or the wind dies down. But batteries are now being put to wider uses, including as a power source placed directly at the site of data centers, serving both as backup power and to help stabilize power consumption at those large AI warehouses, said TD Cowen analyst Jeff Osborne.
"There's an explosion of battery interest at the data center," Osborne said.
New data centers use enormous amounts of power, and usage can ramp up and down quickly, so they need devices that can quickly meet that demand and help smooth the peaks and valleys. Other kinds of power-producers may not have what it takes to meet the moment. Natural gas peaker plants, which are designed to ramp up when power needs rise, can't move fast enough to deal with some of these surges. But batteries can, Osborne said.
"The industry is using batteries as a shock absorber," he added.
The rise in renewables adoption across the U.S. was already expected to cause battery installations to increase steadily through the decade, but data centers will supercharge the growth rate, according to Morgan Stanley. Last year, approximately 57 gigawatt-hours worth of storage was added to the grid. By 2030, installations could rise to 279 gigawatt-hours, with 169 gigawatt-hours coming from data centers, the bank estimates. A gigawatt-hour of energy can power about 1 million homes for an hour.
As things stand today, U.S. battery capacity can meet just about all domestic demand, and supply is still growing fast. But if the data center story plays out in the way Morgan Stanley thinks it will, demand will far outpace supply in the coming years. Big tech has endorsed the strategy of using more batteries, which is what's giving the trend legs. Nvidia included batteries in its recommended architecture for data centers.
Nonetheless, it isn't so easy for investors to play the theme. For starters, chasing the rally from here looks iffy. The run-up in the shares of some companies already embeds a lot of growth.
Secondly, many of the companies making these batteries aren't pure plays, which means shareholders will also be exposed to any risks or negative headlines from their other business segments.
The leaders in U.S. battery cell production are foreign companies like LG Electronics and Samsung, both of which are larger conglomerates. Among U.S. names, Tesla is the biggest player, with Ford on track to rank second after last month's announcement. Both of those companies, of course, make the bulk of their money from selling vehicles.
Fluence, a Virginia-based company that owns a large Arizona battery-assembly factory, is one of the few pure-plays, but its model hasn't yet been proven at scale. On Monday, Nvidia named Fluence as a partner in its recommended design for data centers.
It wasn't the company's first endorsement from big tech. Last month, Fluence said it had signed two master supply agreements with hyperscalers. In an interview in February, Fluence CEO Julien Nebrada told Barron's the battery market will be oversupplied for the next few years. But Fluence's advantage is in the way it assembles batteries into sophisticated systems that can help big tech meet its AI goals, he said.
That said, investors aren't fully convinced that Fluence can produce steady returns. The company's margins have been shaky at times, and it depends on other companies to make its underlying battery cells. Fluence stock fell sharply in early February after a disappointing quarterly result. Mizuho analyst Maheep Mandloi, who rates the stock at Underperform, noted that the Nvidia recommendation would still allow other competitors to make batteries for the data centers. He says Fluence can grab 10% market share in battery storage, but he doesn't expect the Nvidia-driven rally to keep going from here.
As for Ford, the energy business has clearly sparked investor interest, leading to the stock's biggest monthly gains since 2009. Ford is repurposing battery production that it expected to use for its electric vehicles, because EV sales have slowed.
The company is spending $2 billion to build the energy storage business and expects to start making deliveries in 2027. But some analysts worry about its staying power. Ford is licensing its battery tech from Chinese giant CATL. That could end up being a hindrance, because Trump's tax bill added rules that limited tax breaks for projects that use too much Chinese content. The company says it "meets material assistance and domestic content standards relevant to grid-scale storage." But the Treasury Department hasn't finalized the rules yet. Whether Ford will comply with the final rules is "the million-dollar question," Osborne said.
In addition, Ford stock's recent rally has already priced in a lot of optimism. Morgan Stanley is excited about Ford's energy business, and predicts it can add $10 billion in value to the company once the capacity is fully built. But the stock's surge over the past month has already added even more than $10 billion in market value.
One investor sees another way to play the battery surge. Seth Kirkham, the chief investment officer for equities of climate-focused firm Galvanize, told Barron's in an email that he likes SOLV Energy, one of the largest renewable installers in the country. SOLV installs lots of batteries, so can benefit as they become more useful, without taking the manufacturing risk. SOLV is up 14% since its initial public offering in February.
The battery age may be upon us. Investing in it still looks tricky.
Write to Avi Salzman at avi.salzman@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
June 03, 2026 16:46 ET (20:46 GMT)
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