Solar Stocks Glimmer as China Demand Rebounds From Lows
A rise in installations in the world's largest solar market offers a potential turning point for an industry grappling with a global supply glut and plunging prices.
A potential ray of light has emerged for the beleaguered solar energy sector, as new data indicates that solar power installations in China, the industry's most critical market, are rebounding from a near three-year low. The news, first reported by Bloomberg, has injected a dose of cautious optimism into a market that has been battered by severe price compression and a massive oversupply of components.
The report signals a potential demand recovery that could help absorb a glut of solar panels that has crushed manufacturer margins over the past two years. The industry has been contending with what analysts describe as a painful market correction, driven by a rapid expansion of polysilicon production capacity in China. This led to a staggering 50% collapse in global PV module spot prices between late 2022 and the end of 2023, with prices for some mainstream panels falling as low as €0.10 per watt in 2025, creating a challenging environment for producers.
This demand signal from China is pivotal. The country installed a record 212.2 GW in the first half of 2025, nearly doubling the rate from the previous year, though a slowdown was widely anticipated for the second half. The latest installation figures suggest that underlying demand may be more resilient than previously forecast, providing a crucial lifeline for global manufacturers.
Shares of major solar companies reacted to the prospect of a more stable demand environment. First Solar (NASDAQ: FSLR), a major U.S. manufacturer, has been a standout performer in the sector, with its stock trading around $241 on Friday. Analysts maintain a largely positive outlook on the company, holding a "Strong Buy" consensus with price targets suggesting further upside. First Solar's focus on differentiated thin-film technology has helped insulate it from some of the intense price competition in conventional silicon modules.
In contrast, Canadian Solar (NASDAQ: CSIQ), which has significant manufacturing exposure to China, traded near $15.00. The company faces a more mixed analyst sentiment, with price targets reflecting both the potential for a cyclical recovery and the persistent risks of margin pressure from overcapacity.
Despite the positive demand signal, the path forward for the solar sector remains complex. According to a market outlook from SolarPower Europe, after an expected 10% global growth in installations in 2025, the market is projected to stall, with growth slowing to just 1% in 2026. This forecast underscores the significant structural headwinds that a single data point from China, however positive, cannot erase overnight.
For now, investors are clinging to the hope that the floor for demand is in. A sustained recovery in Chinese installations could be the first step in bringing the global solar market back into balance, but the massive overhang of manufacturing capacity suggests the industry's road to recovery will be a marathon, not a sprint.