Investing in sustainable energy is a good reminder that the economy, more than politics, is a better predictor of stock performance. In 2021, renewable energy stocks surged on expectations of favorable treatment from the Biden administration. However, that growth was pushed back by the reality of higher interest rates and slower economic activity.
An opposite story is occurring in 2025. At the start of the year, sustainable investments were under pressure. Data from Morningstar shows that outflows to global sustainable energy funds hit a record of $11.8 billion at the beginning of the Trump administration.
However, that’s started to reverse with approximately $5 billion flowing into those funds in the next quarter. The resurgence has two implications for investors.
First, artificial intelligence's energy demands are a tailwind for renewable energy. Meeting this demand will require an all-of-the-above approach.
That leads to the second point. Investors already see that, like the dot-com era, it’s no longer good enough for a company to tout an AI strategy; it’s about results. The same is true with sustainable energy. The best investments in this space will be the companies doing more than “greenwashing” and delivering on meeting the promise of creating a more sustainable economy.
A Pick-and-Shovels Play on Electrification
Industrial stocks have been some of the best-performing stocks in 2025. But that hasn’t been the case with Hubbell Inc. (NYSE: HUBB). The stock is down around 0.8% through Oct. 10 and 8.8% in the last 12 months.
The company is a pick-and-shovels play for utility companies. It makes the products needed to upgrade the nation’s electrical grid and meet AI's power demands. It’s not a pure play on renewable energy but essential to the electrification story.
The company’s top-line growth in the last year has not been impressive. But the bottom line has been growing, as have the company’s margins, including double-digit EPS growth in the latest quarter. Hubbell also pointed to strong demand from data centers.
Analysts forecast a 13.5% increase in the HUBB stock price and earnings growth of around 7.5% in the next 12 months. The stock also trades at around 23x earnings, a discount to its historical average.
Clean Power Leader With Nuclear Upside
NextEra Energy Inc. (NYSE: NEE) is one of the leading renewable energy stocks. The company is the world’s largest renewable energy generator from wind and solar sources. With both industries in the Trump administration's crosshairs, this may seem like a bad investment time.
But there are a few things to consider. First, the company’s backlog for wind and solar projects is still increasing. Second, the company is well-positioned to be one of the providers of nuclear energy, which is recognized as a clean energy solution that can meet the energy demand from data centers.
Finally, through its Florida Power & Light Company, NextEra is one of the nation’s largest regulated electrical utilities. That will keep a high floor on the company's revenue and earnings.
NEE stock is trading close to its 52-week high and the analysts’ consensus price target. However, analysts have been raising their targets ahead of the company’s upcoming earnings report on Oct. 22. The company’s forward P/E of around 22x gives the stock an attractive valuation.
Water Management Meets the AI Infrastructure Boom
While much of the bull case for energy focuses on electricity, the water demand shouldn’t be overlooked. Xylem Inc. (NYSE: XYL) specializes in delivering innovative solutions to address critical water challenges, including solutions for cooling data centers.
The company will also benefit from the shift from analog to digital water management, as evidenced by its increasing order backlog across every category.
Some purists may argue that Xylem isn’t a pure renewable energy play—but it is firmly aligned with the broader sustainability and circular economy trends. That makes it a compelling option for investors looking for exposure to climate-resilient infrastructure. XYL stock is trading within 5% of its consensus target and 52-week average. Notably, Citigroup recently issued an upgrade, and its forward P/E of around 31x suggests room for valuation expansion.