Three Stock Market Stories at the Intersection of AI, the Power Boom and Margin Recovery – Infineon, Nordex and RE Royalties

Infineon: AI Boom Lures Buyers Back - Is a 45% Price Jump Possible?

With a nearly 7% price gain at the start of the week, Infineon shares (WKN: 623100 | ISIN: DE0006231004 | Ticker: IFX) made a strong comeback. Warburg Research provided the impetus with a new "Buy" recommendation. The analyst sees opportunities again following the recent correction. But does the growing business with AI data centres already justify the next big price jump?

Warburg analyst Malte Schaumann has upgraded Infineon from "Hold" to "Buy". However, his price target remains at EUR 84. Based on the current price of about EUR 57.88, this represents a theoretical upside of around 45%. Schaumann's argument: While the share price has pulled back, business with chips for AI data centres is accelerating. In his view, a more favorable valuation thus coincides with better business prospects.

Behind this optimism lies an often-underestimated aspect of the AI boom: power supply. High-performance servers require large amounts of energy, which must be converted and distributed as efficiently as possible. This is precisely what Infineon supplies with its power semiconductors. The company thus benefits from the expansion of data centres, even though it does not develop AI models itself. For the current fiscal year, the company expects more than EUR 1.6 billion in revenue from power supply solutions for AI data centres.

The quarterly results, already published on August 5, demonstrate the economic basis for this optimism. In the third fiscal quarter of 2025/26, which ended in late June, revenue rose by about 13% year-over-year to EUR 4.172 billion. Segment earnings reached EUR 797 million, with an operating margin of 19.1%. The bottom line was a net profit of EUR 423 million. For the final quarter ending in September, management is setting the bar higher: revenue of approximately EUR 4.7 billion and a segment profit margin of about 23% are expected. This would bring total revenue for the full fiscal year to around EUR 16.3 billion. The outlook calls for both additional revenue and significantly higher profitability.

It is also worth taking a closer look at cash flow. Infineon projects adjusted free cash flow of approximately EUR 1.85 billion. The unadjusted figure is expected to reach about EUR 900 million; this takes into account the acquisition of the sensor portfolio from ams OSRAM. The two metrics therefore offer different perspectives on available cash inflows. However, the stock market is already demanding a lot from the company. Based on the past twelve months, the P/E ratio stands at around 67 according to current market data. If growth falls short of expectations, this valuation would be correspondingly harder to justify.

From a technical analysis perspective, Infineon has reclaimed the 20-day moving average at EUR 57.75 and is trading above the rising 200-day moving average at EUR 53.53. Following the sharp decline since June, this is an initial sign of stabilization. However, a confirmed trend reversal cannot yet be inferred from this. The falling 50-day moving average at EUR 63.33 and the 100-day moving average at EUR 66.77 remain above the current price. These levels represent potential next hurdles. On the downside, the 20-day moving average, followed by the zone around EUR 54 and the 200-day moving average, are important reference levels.

RE Royalties: Royalty Model for the Electricity Boom

Rising demand for electricity, driven by electrification, data centres, and AI applications, is structurally transforming the energy market. According to data from the US Energy Information Administration, renewable energy will account for approximately 93% of newly installed US electricity capacity in 2026—a clear indication of where investment capital is flowing. In this environment, RE Royalties (WKN: A2PN0F | ISIN: CA75527Q1081 | Ticker: Y2V) occupies a unique niche. The company finances developers of solar, wind, and energy storage projects and, in return, receives revenue-based returns, known as royalties. The advantage of this model is that RE Royalties does not act as an operator itself and thus avoids a large portion of traditional construction, cost, and operational risks. This is attractive to investors because it creates a capital-light, potentially highly scalable revenue model for expanding renewable energy.

Notably, RE Royalties expanded its collaboration with Solaris Energy. In early August, RE Royalties increased its existing investment by an additional USD 1 million, bringing the total to USD 4.8 million. At the same time, a letter of intent was signed for a potential financing volume of up to USD 67.5 million. At its core, this involves 16 already-financed plants and, looking ahead, another 96 solar projects with a total capacity of approximately 190 megawatts. Cash flows from the investments are structured to last at least 25 years; thereafter, royalties continue for the remainder of the respective projects' lifespans. This generally creates predictable cash flows, although the actual leverage effect will only become apparent once the projects in the pipeline are actually finalized.

Developments to date show that the concept works from an operational standpoint. According to the company, more than CAD 83 million has been invested to date, resulting in a portfolio of over 130 projects. 121 of these are already generating ongoing cash flows. The average return on capital employed is around 19%, which is notably high in the infrastructure and financing sector, though it also reflects the greater complexity of smaller, specialized transactions. Added to this is a dividend of CAD 0.04 per share, which, based on a share price of CAD 0.39, corresponds to a double-digit return. The key question, however, remains whether this distribution will be sustainably covered in the long term by a broad and growing royalty portfolio—rather than being supported solely by the current portfolio.

The discrepancy between the project portfolio, including its steady cash flows, and the current market capitalization is striking. With a market capitalization most recently of around CAD 16.5 to 17 million, RE Royalties is significantly undervalued in the market relative to what its project pipeline would suggest. At the same time, the Board of Directors, together with PwC, is exploring strategic options—ranging from partnerships and new financing structures to a potential sale. This could be seen as a signal that management estimates the intrinsic value to be higher than the current valuation. The bottom line is that RE Royalties remains a speculative small-cap stock with interesting exposure to the global expansion of renewable energy. The opportunity profile is there, but its realization depends largely on access to capital, the certainty of closing new deals, and the continued consistent scaling of the portfolio.

Nordex Jumps Nearly 10% - Earnings Are Growing Even Faster

A nearly 10% gain in a single day: Nordex shares (WKN: A0D655 | ISIN: DE000A0D6554 | Ticker: NDX1) attracted attention at the start of the week. However, another figure stands out even more. In the second quarter, net profit rose by around 260%. A new "Buy" recommendation from Bank of America is now bringing this improved profitability back into the spotlight. Investors are wondering whether the recent price weakness might have been a buying opportunity.

On September 7, the stock rose 9.96% to EUR 40.42 in afternoon trading and, after hitting new highs, closed yesterday at EUR 40.88. As indicated above, this renewed optimism had a specific catalyst: Bank of America upgraded Nordex from "Neutral" to "Buy" and raised its price target from EUR 50 to 54. Based on the current share price, this analyst target offers about 34% theoretical upside. Analyst Alexander Jones sees opportunities for increasing profitability in, among other things, the German business, new US orders, and a stable supply chain. His assessment aligns with figures that already show a significant improvement. The key question now is whether Nordex can sustain this higher earnings level over several quarters.

In the second quarter of 2026, revenue rose by 16.3% to EUR 2.179 billion. Earnings before interest, taxes, depreciation, and amortization (EBITDA) increased from EUR 108.2 million to 223.8 million. The EBITDA margin jumped from 5.8% to 10.3%. Nordex thus converted a significantly larger portion of revenue into operating profit. The improvement in net income was even more pronounced: net income rose from EUR 31 million in the same quarter of the previous year to EUR 111.5 million. At the same time, free cash flow reached EUR 164.6 million. Order intake in the project business grew by approximately 32% to 3.054 gigawatts. Including service contracts, the order backlog stood at EUR 18.4 billion at the end of June.

This performance builds on an already improved start to the year. In the first quarter, Nordex had posted a net profit of EUR 53.6 million and an EBITDA margin of 8.2%. However, free cash flow was negative at that time, at EUR 98.1 million. For the first half of the year as a whole, this results in a positive cash inflow after investments of EUR 66.5 million. Quarterly fluctuations therefore remain significant.

For the full year, Nordex continues to expect revenue of EUR 8.2 to 9 billion and an EBITDA margin of 8% to 11%. In the medium term, the company is aiming for 10% to 12%. The substantial order backlog supports this. However, it will only become valuable to shareholders if the projects are completed on schedule and with adequate margins. With a P/E ratio of around 25 based on the past twelve months, further profit growth is now key. From a technical analysis perspective, Nordex has reclaimed the 20-day moving average (MA) at EUR 38.58, the 200-day MA at EUR 38.80, and the 50-day MA at EUR 39.96. This significantly improves the picture following the recent weakness. The 100-day MA at EUR 42.07 remains the next major hurdle. If the stock holds the zone around EUR 40, that would support the recovery. In the event of a pullback, the range between EUR 38.58 and 38.80 would initially come back into focus.

Infineon is benefiting from the expansion of AI data centres, but must continue to confirm the expected growth for its ambitious valuation to remain fundamentally justified. RE Royalties is betting on renewable energy expansion through long-term revenue-sharing agreements; however, as a small-cap stock, it remains dependent on new contracts and ongoing scaling. Nordex impresses with significantly higher profits, improved margins, and a strong order backlog, but the key question remains whether it can sustain this profitability over the long term.