FSLR Stock Slips Overnight: First Solar's AI Power Demand Opportunity Faces Tax Credit Test, Says Analyst

Morningstar trimmed its estimated value for First Solar to $191, citing ending tax benefits and strong competition despite growing electricity demand from AI.

• The lower valuation reflects expectations that solar panel sales could weaken as tax benefits start ending in the early 2030s. 
• While U.S. manufacturing policies support First Solar’s market position, higher production costs and strong competition remain challenges. 
• Though strong cash reserves support expansion, reliance on U.S. tax credits and policy changes creates financial uncertainty. 

First Solar Inc. (FSLR) stock slipped overnight after Morningstar slashed its fair value estimate, warning that expiring U.S. solar tax credits and fierce competition could squeeze profits even as surging AI data center power demand creates a new growth opportunity. 

First Solar stock edged 0.7% lower overnight, ahead of Tuesday, after a 1% climb in the regular session. 

First Solar Valuation Reflects Concerns Over Future Incentives

Morningstar analyst Bischof lowered his fair value estimate for the solar panel maker to $191 per share from $206, saying the stock was trading close to its estimated worth as of Monday.

The firm maintained its no-economic-moat assessment and ‘Very High Uncertainty’ Rating for First Solar. The analyst believes intense competition and pressure on manufacturing costs prevent the company from building a lasting competitive advantage.

The revised valuation reflects weaker expectations for solar panel sales after tax incentives begin expiring in the early 2030s. However, Bischof said First Solar could benefit from growing electricity needs associated with artificial intelligence, data centers and advanced manufacturing.

Thin-Film Technology Sets First Solar Apart

Unlike most solar companies that use silicon, First Solar makes panels with a thin-film material called cadmium telluride. Its manufacturing process reduces dependence on Chinese suppliers, and its panels can perform better in hot and humid weather. 

The company is also the largest solar module manufacturer headquartered in the Western Hemisphere. Its strong position in the U.S. utility-scale market, where Morningstar estimates it has historically held about 30% market share, gives it an edge as domestic manufacturing policies favor local production.

Still, the firm cautions that First Solar's manufacturing costs per watt remain somewhat higher than those of silicon-based competitors. The broader industry has become price-driven as manufacturing capacity expands and technological differences become less durable.

First Solar’s Backlog Provides Visibility Despite Decline

First Solar’s pending orders fell to 45.1 gigawatts in June from 50.1 gigawatts at the end of 2025, as it delivered more panels than it secured in new deals. However, existing orders still give investors an idea of the company’s future sales. 

Morningstar expects First Solar to increase its production capacity to 22 gigawatts by the end of 2027, with investments in the U.S. and India. The firm also expects panel prices to rise slightly in the next few years before falling as tax benefits are reduced. The firm's valuation includes U.S. production credits worth $0.17 per watt. These incentives remain important to profit, making future policy decisions a major risk for investors.

First Solar held approximately $1.7 billion in cash and investments at the end of June. Bischof views the company's conservative spending approach and early investment in U.S. manufacturing positively. 

However, Morningstar warns that the company's dependence on U.S. policy, concentrated sales markets, and an uncertain overseas manufacturing outlook could lead to widely varying financial results. While rising power demand could drive growth, the analyst believes the current share price already reflects First Solar's estimated value.

FSLR Stock: Retail View 

On Stocktwits, retail sentiment around the stock remained in ‘bearish’ territory.

A user said, “big mixed bag here. I remember the last time solar companies went through a rate hike cycle... it was ugly.  On the other hand, the policital headwinds in the U.S. could ease after the mid-terms.”

FSLR stock has cratered 31% year-to-date. 

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