SEDG, ENPH, NVTS: Plays on 800V

Everybody knows about the 800V conversion that is coming. NVDA etc have released the specs. There are many parts to that ecosystem change. Most of them are not ‘free options’ whereas SEDG and ENPH mostly are.

• AI datacentres will replace legacy electrical substations with Solid-State Transformers (SSTs).

Do SEDG and ENPH have viable products? Can they get into the ecosystem? Surely Vertiv, ETN etc. will keep them out?

• We don’t think so. SEDG and ENPH come from a distributed solar world. Managing distributed power loads is what they are about.

Plus, Electricity inflation in the US and Europe could become a major consumer issue. There are political solutions, price capping solutions, but the status quo is hard to change and takes time. After the solar implosion in 2024, where demand halved, the solar market looks to have found a bottom.

There is nothing like nearly going bankrupt to focus a company!

Both ENPH and SEDG are repurposing sunk R&D to go after a new and large datacentre market.

• SEDG has partnered with Infineon, ENPH is going alone, both have products in testing.

• NVTS is a supplier: it provides the chips to make solid state transformers (SSTs) work for companies such as Vertiv, Eaton, ENPH. No matter whose product wins NVTS will participate.

We have considered writing solar up a number of times, however until recently the upside was solar normalisation with the cyclical option for a rebound, which is highly sensitive to the 10 year. Given that there are lots of other interest rate sensitive bets with more certain secular drivers we chose to drop them.

So why now? because ENPH and SEDG are moving into the datacentre, and the market is just catching on. NVTS is the supplier of SiC and GaN chips that enable 800V products, they sell to the legacy players.

Market caps are small = another negative. However the TAM potential is big.

• Our basic pitch would be that you should buy all three (ENPH, SEDG, NVTS) as individually they are small but together they are likely to capture a significant portion of the market as each of them has something potentially unique.

The bullish summary is: 800v DC change plays to SEDG and ENPH’s strengths.

• SEDG and ENPH’s solar engineering experience enables them to leapfrog traditional industrial power suppliers who are trying to figure out how to handle the hyper-fast, chaotic load swings of AI.

• Note: Shipments of actual product will not happen until 2028! Up until then it will be about testing, pilots and backlog growth in 2027.

TAM: Assume ~11 GW of newbuild per year in 2030/31. Which would be approx. $5-$6 billion in 2031. (ENPH and SEDG have revenues of ~$1.2bn and $1.4bn)

• The bet is 800V success, which could ~double earnings in both companies assuming they can each find ~$1bn in revenue.

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