Now, following the recent decline, the stock is back in the $50 range. I suspect the weakness is related not only to the broader correction among some high-beta stocks, but also to the de-escalation of the conflict between the U.S. and Iran. High oil prices had begun to act as a tailwind for the solar sector, especially in Europe, so the reversal in energy prices has likely taken some of the steam out of that short-term euphoria.
This could be my opportunity to at least start a small position and build it up over time as my conviction grows.
For those less familiar with the company: SolarEdge was founded in Israel in 2006 and has become one of the leading companies in the solar inverter industry. The original idea was to improve the way solar energy is harvested, converted, monitored, and optimized.
Instead of simply selling traditional inverters, SolarEdge built its platform around power optimizers and smart inverters. The basic idea was to allow each solar panel to operate more independently and efficiently, rather than having the entire system limited by the weakest panel. This improved energy production, safety, monitoring, and system control.
Over time, SolarEdge became one of the leading companies in solar power electronics. The company went public in 2015, benefited enormously from the global solar boom, and, at its peak, was considered one of the premier brands in the sector.
Then everything went wrong.
The solar industry entered one of its worst downturns in years. Higher interest rates put pressure on demand for residential solar systems, especially in the U.S., where financing costs play a major role for homeowners. At the same time, the entire supply chain underwent a brutal inventory correction. Distributors were left with excess inventory, installers scaled back their orders, and companies like SolarEdge were hit by plummeting demand, negative operating leverage, and deteriorating margins.
The stock reflected this pain. From its all-time highs, SolarEdge plummeted by more than 90%, and by early 2025, the market was effectively pricing the company as if the risk of bankruptcy had become a real possibility.
That’s exactly what made the situation interesting.
SolarEdge wasn’t just any run-of-the-mill, low-quality solar company. It was a former industry leader with genuine technology, a global presence, a large installed base, and a business that had already proven capable of generating attractive margins in a healthier solar environment.
The question was whether the company could survive the downturn, streamline its operations, and position itself for the next cycle.
At the moment, I think the answer is yes.
Over the past year, the new CEO has focused on stabilizing the company. SolarEdge has sold or divested several non-core businesses and underperforming divisions, including the tracker business, the Kokam battery manufacturing operation, and the e-mobility division. The goal was simple: simplify the structure, preserve capital, cut costs, and refocus on the core solar and energy storage business.
In my opinion, that was the right move.
The company had expanded into too many areas during good times, and when the cycle turned, that complexity became a burden. By eliminating non-core activities and focusing on the areas where SolarEdge has the strongest competitive position, management is attempting to rebuild the company on a much healthier foundation.
The results have already improved.
Margins have recovered from deeply negative levels, free cash flow has turned positive, and management has signaled a return to profitability sooner than many investors expected. The stock is no longer a distressed equity story. It is now more of a turnaround story.
That is the first part of the thesis: the core solar business.
Even if we completely ignore the second part, SolarEdge could still be an attractive investment should the solar cycle improve. Demand has been dampened by high interest rates, inventory destocking, and weak sentiment across the entire sector. But these are cyclical factors.
Eventually, interest rates should become less of a headwind, inventory levels should normalize, and demand should recover. Electricity prices remain high in many regions, electricity demand is rising, and energy independence remains an important issue. Solar isn’t going anywhere.
In fact, I think Europe is probably better positioned than the U.S. when it comes to the solar market. The U.S. residential solar market has been hit hard by high interest rates, political uncertainty, changes to subsidies, and net metering pressure in some states. Europe, of course, has its own problems, but structurally, the region has even stronger incentives for energy security, higher electricity prices, and a more urgent need to reduce dependence on energy imports.
That’s one of the reasons why I currently prefer SolarEdge over Enphase $E2NP34.
When comparing the two, I believe that SolarEdge’s core business exposure is more attractive today because it has greater international and European leverage. Should Europe recover faster than the U.S. residential market, SolarEdge could be better positioned to benefit from it.
Then there’s the storage aspect.
SolarEdge is no longer just an inverter company. Batteries are becoming an increasingly important component of solar systems. As battery attachment rates rise, revenue per installation increases, the system becomes more valuable to the customer, and the company can capture greater profitability per project.
This is important because solar plus storage offers a much stronger value proposition than solar alone. Customers don’t just want to generate electricity during the day. They increasingly want emergency power and better control over their energy consumption at home or in commercial settings.
This plays directly into SolarEdge’s architecture.
The DC-coupled system allows solar generation and battery storage to work together more efficiently, with less energy loss due to unnecessary conversions. As storage becomes a larger part of the market, SolarEdge could benefit from higher revenue per system and potentially better margins.
So the first level of this thesis is already interesting: a former solar market leader, following a brutal downturn, with a simplified business model, improving margins, free cash flow back in the black, tailwinds from storage, and potential upside driven by a recovery in the solar cycle.
But the second layer makes the thesis even more exciting.
This second layer consists of solid-state transformers, or SSTs for short.
This is the part of the thesis that initially made me take the company more seriously. SolarEdge has been working on power conversion for decades, and management believes that a significant portion of the technology required for SSTs is already present in the company’s current capabilities.
As AI workloads scale, data centers are becoming much more power-intensive. The industry is moving toward high-voltage architectures, including 800 VDC systems, because traditional power distribution becomes less efficient as power density increases. Simply put: the more power a data center needs, the more important efficiency becomes.
Every percentage point of efficiency counts.
If a data center can reduce conversion losses, reduce heat, save space, simplify infrastructure, and improve reliability, this can translate into very significant economic benefits. This is exactly where SSTs could come into play.
SolarEdge’s SST concept is designed to replace parts of the traditional power architecture with a more efficient system. Instead of relying on multiple conversion stages between the grid and the data center, the goal is to create a more direct and efficient architecture that can better support future AI infrastructure.
The potential benefits are substantial:
Higher power conversion efficiency
Lower energy losses
Less heat generation
Reduced cooling requirements
More usable space for computing equipment
Better compatibility with 800 VDC data center architectures
Data centers are becoming one of the biggest bottlenecks in AI expansion. Everyone is talking about GPUs, but GPUs are useless without power. As AI infrastructure continues to scale, the demand for better power distribution and power conversion is expected to rise dramatically.
Important: SolarEdge is not alone in this. There are several other companies working on SST technology, and this is still an early-stage market. Commercialization is not expected before 2028, and we should not assume success is a given.
But I think SolarEdge could have a real chance.
First: The company began working on this much earlier than most investors realize. This isn’t something that was decided on a whim last quarter just because AI became a hot topic. The company’s history is built around power electronics, DC architecture, and energy conversion. SSTs aren’t a completely foreign change of course. Rather, they’re a natural extension of what SolarEdge has been doing for years.
Second, and perhaps even more importantly: SolarEdge is developing the technology in collaboration with Infineon $IFX (-5,05%) .
Infineon is one of the world’s leading semiconductor companies, particularly in power semiconductors, and a close partner of NVIDIA $NVDA (-2,27%) .
A partner like Infineon lends the project significantly more credibility than if SolarEdge were trying to build everything on its own. In a market where reliability, efficiency, scalability, and customer trust are crucial, the Infineon partnership could be a significant advantage.
That’s another reason why I prefer SolarEdge over Enphase $ENPH (-6,39%) .
Enphase is also a high-quality power electronics company, but when it comes to the SST opportunity for data centers, I think SolarEdge is better positioned. It has been working on this for longer, the fit with DC architecture seems more direct, and the Infineon partnership gives it a level of industrial and semiconductor-related credibility that I consider very important.
In short, the SolarEdge thesis has two levels.
The first level is the core solar turnaround.
The company was devastated by the downturn, but the business is stabilizing. Margins are improving, free cash flow has recovered, non-core businesses have been divested, and management is refocusing on profitable growth. Should the solar cycle improve, I believe the stock could see a significant revaluation, even without any contribution from SSTs.
The second layer is the data center SST option.
If SolarEdge can successfully commercialize this technology, it could open up an entirely new line of business tied to one of the strongest infrastructure themes on the market: AI power demand. That would make the company much more than just a solar turnaround. It could become a “picks and shovels” play for the electrical infrastructure needed for next-generation AI data centers.
The difficult part is the valuation.
SolarEdge is not an easy company to value today. First, it is extremely difficult to assign a fair value to the SST opportunity. We’re still talking about a product in a very early stage that hasn’t yet impacted the financials, and it’s unclear how it will do so. The potential market is huge, but we don’t know what adoption will look like, how high the margins might be, what market share SolarEdge can capture, or how quickly the technology will be commercialized.
Second, the turnaround in the core solar business itself is not yet fully clear. Yes, the company has exceeded expectations, margins have improved, and the business appears to be moving in the right direction. But it’s still a turnaround. Solar demand remains cyclical, the market remains difficult to navigate, and we need more quarters of strong execution before we can say with confidence that SolarEdge is fully back on track.
That’s why I don’t think this is a “cheap stock based on the numbers” situation.
It’s more of a momentum-plus-optionality thesis. In other words: I might be willing to accept a certain degree of valuation uncertainty because the upside potential could be significant if both aspects start to come together.
There are, of course, several risks.
Solar remains a cyclical and politically sensitive industry. Competition is intense. The recovery could take longer than expected. Margins may not fully normalize. And the SST opportunity is still in its early stages; significant commercialization is still more than a year away.
