Clean Energy vs AI
When you pit two up and coming important features of the new world economy, you know it is never going to be a straightforward answer. So that is the disclaimer there! Both have their own merits and place in the economy and to be clearer, both represents the up and coming. This is not comparing between businesses in the sunset industry. These are categories up there in the rising industries and as such rapidly growing ones.
In these categories, companies that are innovative as well as nimble to adopt new technologies as well as corner market share and create a moat will rise as the new behemoths while the others nibble at their feet. Think of where Apple and Microsoft were decades ago. Look at them now. These ‘matured’ companies are trying hard to keep pace and avoid being overtaken and left behind ‘as the old guards of the sunset industry’ as lessons of the past teach them to avoid resting on their laurels.
However, the advantages the newer companies have is that they have been created from the ground up to be in that sector whereas the older big companies need to reorganise and change their whole system to adapt.
In this regard, for the clean energy sector, we have companies like Exxon Mobil and Chevron vs others such as Solar First and Enphase. Specifically narrowing down on the clean energy vehicle sector, we have in one corner VW, Ford versus Tesla and Nio. In the AI segment, we have Intel versus AMD and Nvidia.
It will be a fairer comparison to pit these companies in their relevant sectors but for the sake of the topic, we shall compare Clean energy vehicles versus AI. The market likes to rotate as we know. The smart money tend to have trending flavours and much like a huge tsunami wave, they tend to attract others creating a huge tsunami ball. We see that in how the clean energy vehicle sector rallied and then collapsed after the smart money pulled out and now we are seeing them pump up the AI sector.
I believe the Artificial Intelligence (AI) sector has been sufficiently pumped up and in my opinion it is too richly valued in the current microenvironment to justify an even higher valuation. As such, I believe the smart money is already starting to distribute and reallocating their funds elsewhere.
I would not invest in clean energy vehicles like Tesla or Nio at the moment. Or even AMD or Nvidia. I like those companies and I believe they have a great future and runway ahead. However, the macro environment is still not suitable for new highs in those categories. I would wait for better prices ahead to invest in them and I believe better prices are ahead.
At the moment, cash is a safer alternative considering the risk levels we are at. But if you are looking for a contrarian play or a safer place to park cash, I would look at the energy sector, in particular the clean energy sector. I believe crude and gasoline are due a rally based on technicals and if they do, inflation is going to raise its head again. The energy sector is going to rally and the clean energy sector is going to pick up more pace especially in Europe where energy cost is sky high and consumers as well as businesses have all the incentives and impetus to switch. I kind of like Enphase for this reason. They have underperformed as the tech sector rallies. But they look like bottoming out and has just broken out of their terminating wedge. If they can hold the support, a fierce upwards rally might be in stock. Fundamentally they look good and they are in a booming sector. And I like their business model compared to the other solar plays. They are more of a tech play within the clean energy industry and not a solar panel provider like many. Their product line is very impressive and I am even expecting AI to be a part of their future products looking at their product line and portfolio.
As such, I am expecting Enphase to outperform as markets possibly swoon in the near future.
To those who read this far, here is a freebie info for you. Enphase has broken out of its terminating wedge which looks like a wave 5 of the C wave of a big expanded flat correction starting from early september 2022. It needs to hold the resistance turned support upper trend line of that wedge at 205. If it breaks past 215, the breakout should be in play and a strong rally should start targeting the 300 plus dollar region.
Disclaimer: Please kindly do your own due diligence as this is a sharing article and in no means a form of financial advice. I am just sharing my opinions and thoughts.
Thanks for reading my commentary. Hope it helps!
Stay safe! 😊
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