Fortum, RE Royalties, SolarEdge: Hidden Gems in the Supercycle

SolarEdge: New Partnership, Skeptical Analysts

Strategic partnerships are necessary in many areas to make energy supply as efficient as possible. A partnership already exists between SolarEdge and the German semiconductor manufacturer Infineon. This partnership is now expanding significantly. Specifically, it involves the development of electronic circuit breakers for use in data centres, which are specially tailored to the high demands of artificial intelligence.

These data centres increasingly operate on 800-volt DC networks to efficiently manage the extremely high energy density of AI hardware. SolarEdge is responsible for designing the switching systems, while Infineon contributes its specialized silicon carbide components. The advantage of these semiconductor-based solutions is the elimination of mechanical components, allowing circuits to be interrupted in fractions of a microsecond in the event of a fault. The goal is to establish a fully DC-based power infrastructure for data centres to minimize energy losses and reduce space requirements.

Despite these technological advances, financial experts are taking an increasingly critical view of SolarEdge's short- to medium-term outlook. The investment bank Jefferies has significantly lowered its price target for the stock from USD 45 to USD 31.

Analysts cite the ongoing weakness in the residential business, particularly in the US home market, as the main reason for their caution. Although the commercial and industrial segments are stabilizing, this is not enough to offset the losses in the residential sector. Gross margins are also recovering more slowly than the market had hoped.

Although SolarEdge slightly exceeded expectations for revenue and profit in the second quarter of 2026, the company's subsequent outlook was cautious. Overall, caution prevails. The market now expects SolarEdge to initiate a sustainable turnaround only later in 2026.

RE Royalties: The Unsung Hero of the Electricity Boom

The demand for electricity is growing, and RE Royalties is profiting from it without having to build a single power plant itself. The Canadian company applies the royalty model, familiar from the commodities sector, to renewable energy. Project developers receive capital, while RE Royalties receives long-term, revenue-based royalty payments in return. The model is supplemented by secured bridge financing. This generates recurring cash flows, while the construction and operation of the plants remain with the project partners.

The timing could hardly be better, as US electricity consumption is rising again after years of stagnation, while solar and battery storage are dominating capacity expansion. For 2026, the US Energy Information Administration (EIA) expects a record expansion of 86 GW. Solar alone is expected to contribute 43.4 GW, and battery storage 24 GW.

The partnership with Solaris Energy demonstrates just how much RE Royalties could benefit from this. In August, the company invested another USD 1 million, increasing its commitment to USD 4.8 million. Even more exciting is the non-binding letter of intent for up to USD 67.5 million in royalty financing. In addition to 16 solar projects already financed, the outlook includes another 96 projects totaling approximately 190 MWDC. The Solaris royalties are structured to provide an agreed-upon minimum return for an initial period of 25 years and will continue for the remainder of the projects' operational lifespans.

The track record to date demonstrates this model's potential. Since its founding, RE Royalties has invested more than CAD 83 million in a portfolio of approximately 135 projects spanning solar, wind, battery storage, hydropower, biogas, and energy efficiency. According to the company, the weighted internal rate of return on these investments is approximately 19%.

This places RE Royalties in a strategically advantageous position within the energy transition. The more capital developers need for new projects, the larger the addressable market becomes. If the company succeeds in converting the Solaris pipeline and other projects into long-term royalty income, this currently small company could grow to an entirely new scale.

Fortum: Partnership with Google

Energy remains one of the most important commodities of our time. For this reason, nuclear power is increasingly coming into focus. Fortum Corporation is a Finland-based energy utility specializing in low-carbon electricity generation.

Most recently, the company entered into a partnership with Google. At the heart of this collaboration is a 22-year power purchase agreement. From 2030 to 2049, Google will source roughly half of the energy generated by the Loviisa nuclear power plant in Finland. For Fortum, this contract provides crucial financial planning certainty. Without this assurance, the power plant would likely have had to be taken offline in 2030. The long-term purchase guarantee enables an investment program totaling approximately EUR 1 billion, which is intended to ensure the plant's continued operation through 2050. In addition, the companies have signed an agreement to jointly develop new projects in nuclear energy, renewable energy, and flexibility solutions.

Google's investment in Finland is part of a strategy by its parent company, Alphabet. By 2028, USD 15.1 billion is to be invested in expanding data centre infrastructure in the Scandinavian country. Plans include at least three new data centres as well as the expansion of an existing site. Thanks to its cool climate and access to low-carbon energy, Finland offers attractive conditions for operating energy-intensive data centres.

Fortum is benefiting enormously from these developments. The energy demand of data centres is rising sharply, particularly due to the expansion of artificial intelligence applications. As the region's leading energy provider with a fully emission-free portfolio consisting of hydroelectric and nuclear power plants, Fortum is well-positioned to meet this demand.

The financial markets reacted positively to the announcements. Fortum's share price rose by 15% following the announcement of Alphabet's investment plans. The new power purchase agreement is expected to increase the Fortum Group's return on investment by approximately 1.4% in the long term.

The AI boom is transforming the energy sector far beyond data centres. With the Google agreement, Fortum secures long-term revenue and gains planning certainty for billions in investments in nuclear power and new energy projects. SolarEdge is attempting to integrate its power electronics directly into the power architecture of future AI data centres. RE Royalties, on the other hand, is focusing on the financing side. If the Solaris partnership were to expand to USD 67.5 million, that would multiply the existing commitment and could give the royalty portfolio a significant growth boost.