Why Solar Stocks Have Crashed: The Story Behind ENPH, SEDG, and the Collapse of a Green Dream

From Green Hype to Red Numbers: What Went Wrong With Solar Stocks?

In recent years, the solar industry was heralded as the future of energy. Stocks like Enphase Energy (ENPH), SolarEdge Technologies (SEDG), Sunrun (RUN), and even legacy solar names like First Solar (FSLR) rode high on a wave of climate optimism, government incentives, and investor enthusiasm. But by June 2025, many of these same stocks have plummeted—ENPH down over 85% from its all-time high, SolarEdge tumbling nearly 80%, and smaller players like Sunnova (NOVA) and Sunrun approaching penny-stock territory.

What happened? Why did solar stocks soar—and more importantly, why are they crashing now?

The Solar Boom: Why Stocks Like ENPH and SEDG Surged in the First Place

The solar stock rally from 2020 to 2022 was one of the most remarkable in recent memory. Fueled by the COVID-era stimulus, global interest in ESG investing, and a dramatic political shift toward clean energy, companies like Enphase and SolarEdge became darlings of both Wall Street and retail traders. The Inflation Reduction Act (IRA) of 2022 supercharged that momentum, offering a 30% federal tax credit for residential solar installations, billions in funding for green energy R&D, and incentives for U.S.-based manufacturing.

Enphase saw its revenue and profits soar as demand for its microinverters and solar energy storage systems skyrocketed, especially in North America and Europe. SolarEdge followed a similar trajectory, building a broad international customer base for its inverters and smart energy management systems. With interest rates near zero, the solar financing model was cheap and effective. Homeowners could lock in lower utility bills and reap tax benefits.

Investors were thrilled, and the valuations of solar companies became increasingly detached from traditional fundamentals.

But behind the euphoria, danger was brewing.

The 2023–2025 Slide: Why Solar Stocks Are Losing Value

Fast forward to 2025, and the picture has darkened considerably. As of June 16, ENPH and SEDG are both trading near multi-year lows, and the entire sector is under intense pressure. The reasons are complex and interconnected, spanning government policy changes, macroeconomic shifts, global overcapacity, and sector-specific weaknesses.

1. Rising Interest Rates and Financing Woes

One of the biggest culprits behind the solar stock collapse is the rise in global interest rates. Central banks, including the U.S. Federal Reserve, raised rates aggressively in 2023 and 2024 to combat inflation. As rates climbed, solar loans became more expensive. For consumers, this meant the upfront cost of a solar installation went up, despite tax credits. For companies, higher rates meant tighter margins and ballooning financing costs. Companies like Sunnova and Sunrun, heavily reliant on third-party financing, saw their business models crumble under the weight of rising debt service.

2. IRA Policy Reversals and Legislative Risk

In 2025, political momentum began to shift. A Republican-controlled House and a narrowly divided Senate introduced legislation to phase out solar and wind tax credits much earlier than expected. As of June, the Senate tax committee is working on a plan that would scale down the federal solar tax credit to 60% in 2026 and eliminate it entirely by 2028. Residential solar, in particular, has been put “on the chopping block,” according to Barron’s.

This legislative uncertainty has rocked the sector. Stocks like Enphase and SolarEdge, which depend heavily on residential installations, took massive hits as analysts revised down revenue forecasts and downgraded their ratings. The fear isn’t just lost revenue—it’s a death spiral of demand, job losses, and industry contraction if the credits are removed too quickly.

3. Global Supply Glut and Chinese Overcapacity

Another headwind comes from overseas. China’s solar manufacturers have continued to ramp up production despite softening demand. The result? A global glut in solar panels and components. This oversupply has driven prices down to unsustainable levels. Chinese giants like Longi and Trina are now facing billions in losses, and the ripple effect is being felt worldwide.

This price crash might seem like a win for consumers, but it’s squeezing margins for companies like SolarEdge and Enphase, which have to compete in this low-cost environment while still maintaining their advanced technology and premium branding. Add to this the growing concerns about reliance on Chinese supply chains and U.S. tariffs on imported panels, and you have a recipe for sector-wide margin compression.

4. Company-Specific Troubles: ENPH, SEDG, and Beyond

Enphase Energy has seen its revenue fall flat despite broader adoption of solar. Its Q1 2025 report showed a year-over-year decline in gross margins and a sequential drop in revenue. Inventory buildup, distributor pullbacks, and declining residential demand all played a role. Meanwhile, SolarEdge is dealing with high debt levels, reduced guidance, and deteriorating profitability.

Both companies are also navigating a shrinking pool of installer partners, especially as smaller solar installers exit the business due to regulatory uncertainty and financial constraints. That’s left the entire value chain vulnerable, from manufacturing to installation to servicing.

5. The Collapse of Sunnova and the Warning Signs for the Industry

Perhaps the clearest signal of industry trouble came in May 2025 when Sunnova Energy filed for Chapter 11 bankruptcy. The residential solar company had become over-leveraged in its aggressive growth push and was unable to service its debts as demand slowed and costs rose. Sunnova’s collapse sent shockwaves through the sector, prompting investors to reevaluate risk across all residential solar plays.

Looking Ahead: Is There Hope for Solar Stocks?

Despite the storm clouds, there are still reasons to believe in the long-term viability of the solar sector—particularly for companies focused on utility-scale projects, U.S.-based manufacturing, and vertically integrated operations. First Solar, for example, has weathered the storm better than most due to its thin-film technology, domestic production, and focus on large-scale utility installations.

Additionally, if policy uncertainty clears and some level of tax credit remains, the rebound could be sharp. Technological advances, such as solar-plus-storage solutions and AI-powered energy management, could unlock new efficiencies and attract fresh capital. But for now, investors are likely to remain cautious.

Conclusion: Why Solar Stocks Are Down in 2025 and What Comes Next

Solar stocks surged on a wave of policy incentives, investor enthusiasm, and global demand—but that wave has crashed into the rocks of higher interest rates, political rollback, and global overcapacity. Enphase, SolarEdge, Sunnova, and others are facing real existential threats, and only the leanest, best-capitalized companies are likely to emerge stronger.

The market is watching, and so should investors. As the landscape evolves in the second half of 2025, solar will remain a high-risk, high-reward sector—but only for those who understand its complexities and can navigate its ever-shifting terrain.