The investment logic of energy transition is quietly changing: funds are abandoning clean energy star stocks and flocking to "supply chain bottlenecks".

Less than a year after founding a hedge fund company focused on green energy transition and exploring clean energy investment opportunities, its founder recently stated that currently, investing in renewable energy star companies cannot generate economic and financial returns. "The whole industry - CECEP Solar Energy, wind energy, hydrogen energy, fuel cells - any clean energy is now declared dead," said Nishant Gupta, Founder and Chief Investment Officer of Kanou Capital LLP in London. However, this hedge fund manager insists on seeing the so-called "supply chain bottleneck" - the core equipment suppliers in the energy transition sector, which are indispensable equipment suppliers for energy transition. Facing the political headwinds of clean energy in the United States after Trump's return to the White House, the traditional fossil energy crisis triggered by war, and the high benchmark interest rates, most segments of the clean energy industry are experiencing stagnation or even decline. In the stock market, the entire clean energy investment sector is also sluggish. Statistical data shows that in the past year, the S&P Global Clean Energy Index has fallen by 20%, while the S&P 500 Index has risen by 16% during the same period. Currently, everything related to clean energy seems to have no good news, but may become more sluggish for the entire industry after Trump returns to the White House. With the Trump administration completely dismantling the climate policy blueprint of the world's largest economy, many investors focusing on green energy transformation are taking a wait-and-see approach. "The fundamentals are very bad," said Gupta from Kanou Capital, who previously worked at the hedge fund Clean Energy Transition LLP managing about $2.7 billion in assets before starting his own fund last year. "I'm not talking about the long-term prospects. I'm talking about the significant weaknesses I see now." Long-term investment demand related to clean energy transformation still exists These weaknesses have been brewing for years. The post-pandemic economic recovery era has reignited the demand for traditional fossil fuels, giving green assets their first major blow and making this strategy harder to sell. The US Republican forces then seized the opportunity, issuing bans and lawsuits threats against environmental and social investment strategies. Despite facing these headwinds that cannot be eliminated in the short term, Gupta said the long-term demand related to clean energy transformation remains. Therefore, the hedge fund he manages, with about $100 million in assets, focuses on identifying areas where supply and demand dynamics in the market will inevitably push up prices. The above-mentioned global energy transition investments listed by specific segments show that global energy transition investments exceeded $2 trillion last year, although the annual growth rate from 2021-2023 to 2024 has dropped from 24-29% to 10.7%. So far, the largest segments are electrified transportation, renewable energy, and grid systems. "By the end of this decade (around 2030), investment related to green energy transformation is expected to increase from about $1.8 trillion per year to $5 to $6 trillion," he said. "It is estimated that about one-third of the expenditure will be used to support the supply chain, and we are highly focused on identifying 'energy transformation supply chain bottlenecks' as core investment opportunities in clean energy." These investment targets in the clean energy sector are worth paying attention to The latest investment opportunities pointed out by Gupta include Ingersoll Rand Inc., headquartered in North Carolina, which produces large equipment designed to control energy flow, such as air and gas compressors, vacuum systems, and pumps. The company's stock has risen by about 80% over the past three years, but has dropped by 7% compared to the S&P 500 index this year. Its largest institutional investors include Capital Group, Vanguard Group, and BlackRock, the three asset management giants. "Because the electricity costs over the entire lifecycle of compressors often exceed their initial purchase price, investing in high-efficiency basic equipment and continuous performance improvements can bring significant long-term savings," Gupta said. Another company favored by the prominent hedge fund manager is the French manufacturing giant Legrand SA, which produces various core products from switches to fuses and circuit breakers. Its stock has risen by about 12% this year. "When heat pumps and electric vehicle chargers are added to every household globally, electricity usage can almost double, and this surge in demand benefits Legrand greatly," Gupta said. According to institutional compiled statistics, the company's largest institutional investors are Sun Life Financial Inc., Massachusetts Financial Services Company, and BlackRock. Although Kanou Capital has made energy transition its overall investment strategy, Gupta said he only selects companies with expanding profit margins and strong performance growth. However, in recent years, such performance metrics have often been difficult to achieve in key areas of the global energy transition economy, leading to huge market value setbacks for traditional green transformation or clean energy star stocks such as Orsted A/S, and companies in the clean energy supply chain sector like Ingersoll Rand and Legrand SA. Investing in companies that rely on clean burning hydrogen has also lost its prospects for performance growth due to sustained high costs. In the US stock market, former clean energy star stock Sunnova Energy fell 64.25% on Monday, bringing down the entire US stock CECEP Solar Energy sector. Prior to this, the company reported higher-than-expected losses and warned of significant uncertainties in its ongoing operations; less than a week ago, the largest US CECEP Solar Energy system manufacturer, First Solar Inc., stated that customer delays are becoming increasingly serious, and the largest residential CECEP Solar Energy company in the US, Sunrun Inc.It also indicates that the installation volume for this year is expected to remain flat.These seem to indicate that the leaders in the broad CECEP Solar Energy industry are facing their biggest challenge since entering the mainstream market over a decade ago, while the prospects for core equipment suppliers in the clean energy supply chain are much better in comparison. Typical success stories have been very evident in recent years. The stock price of Siemens Energy AG tripled last year, largely due to the company's core position in the energy supply chain and the significant demand for grid expansion globally under the AI trend, as power systems are the core driver of efficient operation for data centers. Last year, GE Vernova Inc., which was spun off from General Electric's energy business, saw its stock price soar by over 150% since then, with its logic also based on the massive power consumption scale brought about by AI and its core position in the energy supply chain. "Overall, investments in the grid will continue to increase," Gupta said. "The supply chain will benefit from this."