After seeing wind and solar stocks plummet within hours of Trump's election victory, asset managers are looking at an area of green transformation that they say will ignore the president-elect's anti-ESG agenda: power grids.

One day after the election, TD Securities analysts told customers that power grids and the equipment needed to build them are now “one of the best positioned energy transition sub-sectors.”

This appeal has paid off. Since the November 5 general election, a key stock market indicator measuring transmission grid equipment has risen by about 6%, while the broader S&P Global Clean Energy Index, which covers a wider range, has fallen by about one-tenth. Asian and European suppliers, which receive a large portion of their revenue from the US market, have also rebounded. Japan$Hitachi (6501.JP)$The company increased by more than 8% over the same period.

The fund manager said that investing in US electricity and grids is a way to avoid the impact of tariffs that hurt other industries. As Trump's protectionist policies seem to force more manufacturing back to the US, demand for energy in the US will soar, increasing the case for investment.

“We are very optimistic about America's electricity demand,” said Ran Zhou, portfolio manager at New York-based hedge fund Electron Capital Partners LLC. “Related to this is long-term carbon-free energy.”

Shares of companies that develop power grid equipment have risen since the November 5 general election, including$Eaton (ETN.US)$,$Rockwell Automation (ROK.US)$with$AMETEK (AME.US)$All of these companies increased by more than 6%.$Emerson Electric (EMR.US)$That's an increase of over 7%.

Even before the US election, grid-related companies had outperformed other sectors of the green industry, and the NASDAQ OMX Clean Edge Smart Grid Infrastructure Index (NASDAQ OMX Clean Edge Smart Grid Infrastructure Index) rose 20% last year. The asset management company interviewed said that under the impetus of Trump's tariffs, the larger US manufacturing industry seems to trigger a new wave of growth in US grid stocks.

Trump has made it clear that he wants to remove unused funds from the Biden administration's iconic climate law, the 2022 Inflation Reduction Act. His pro-fossil fuel stance has sparked fears among green investors, who fear that Trump's entry into the White House will hinder the development of US renewable energy projects.

But at the same time, the president-elect promised that US companies can get cheap electricity. Analysts say this is impossible without building renewable energy.

America's energy policy is changing, and at the same time there is a historic surge in demand. Consulting firm Wood Mackenzie estimates that the US is currently facing the biggest increase in energy consumption in decades, and energy consumption in some regions is expected to increase 15% over the next five years.

Much of this demand will come from tech companies that build data centers to drive the development of artificial intelligence. In recent months,$Amazon (AMZN.US)$, $Alphabet-A (GOOGL.US)$ with$Microsoft (MSFT.US)$They each announced nuclear energy deals to power their operations through carbon-free power generation.

Analysts at Morgan Stanley wrote in a report released on the second day of the US election that current estimates of the renewable energy market “have not taken into account further changes in the demand for renewable energy in the data center market.”

Under Biden's leadership, the development of the power grid received more than $30 billion in government support. In May of this year, US regulators finalized relevant regulations and implemented the largest industry reform in at least ten years, aimed at speeding up grid construction.

Jerry Goh, investment director at Abrdn Plc, said that over the next two to three years, grid upgrades will benefit global equipment manufacturers. He added that this is because US production is insufficient and the equipment “backlog has further increased, so this is quite a big story.”

The current expected price-earnings ratio of the Nasdaq Grid Index is 20.3 times. Although this valuation is high compared to the global benchmark stock index, it is still close to the ten-year average, and the compiled data shows that earnings per share will increase by about 11% over the next year.

Pictet Asset Management's client portfolio manager Yi Shi said the company's clean energy transition fund had invested in companies that cater to the needs of the US power grid before the election, and there is currently no intention of withdrawing funds.

“We're not just looking at overall valuations; we're also looking at potential profit growth,” Shi said.

Edit/Rocky