Plug Power, Ceres Power and Fuelcell Energy, which make hydrogen fuel cell systems that power devices ranging from warehouse machines to cars, are leading that charge, jumping 400% to 1,600% in the last year.
"Hot money is flowing towards renewables and clean energy, and there's been a clear re-rating of valuations in the sector," said Emmanuel Cau, head of European equity strategy at Barclays.
While a lot of focus has been on hydrogen's role in the automotive sector, its usage is growing far beyond that.
The European Union plans to scale up renewable hydrogen projects across polluting sectors ranging from chemicals to steel with cumulative investments in renewable hydrogen in the region seen reaching up to 470 billion euros ($570 billion) by 2050, the region's commission said.
That has fuelled the stocks of electrolyser makers Norway's Nel and UK's ITM Power.
"The momentum just keeps going really with this theme," Ashim Paun, HSBC's global co-head of climate change and ESG research said on a webinar.
ZeroAvia, a hydrogen plane startup, last month secured $37.7 million in new cash via a funding round led by Bill Gates' Breakthrough Energy Ventures and from the British government to support its bid to develop zero-emission aircraft.
The frenzy in hydrogen-related stocks has led to some concerns about a bubble, with companies trading at extreme prices based on expectations that their revenue will surge in future, despite worries about possible headwinds for the sector.
Widespread adoption of hydrogen as a fuel for cars is far from a given.
Toyota launched a new hydrogen fuel cell car in December, but it has largely failed to win customers over to the technology amid concerns about a lack of fuelling stations, resale values and the risk of hydrogen explosions.
The momentum behind electric vehicles may be another headwind, said Jonathan Bell, chief investment officer at Stanhope Capital.
"The problem with hydrogen is that sometimes when you have two competing systems, it's not the better technology that wins, it's the one that gets market share and the network effect first of all," Bell said.
UK-based ITM Power, which manufactures the electrolysers needed to make green hydrogen, is trading at a massive seven times its 2030 sales, while rival Nel is relatively cheap at three times 2030 sales, according to HSBC's calculations.
Some investors may avoid the sector altogether, after a similar burst of enthusiasm two decades ago proved short-lived, and much of the latest excitement around green energy is based on Biden's policy plans, which are yet to be passed into law.
But no bank is ringing the alarm bells, yet.
JP Morgan analysts advised long-term investors in a recent note to take advantage of any pullback in prices and "take an unorthodox approach to valuation for the next several years" - in other words, not worry about a potential bubble.
Sean McLoughlin, HSBC EMEA head of industrials research, said scarcity value in the market, unprecedented fiscal stimulus, low cost of capital and debt and low yields in other asset classes mean the hydrogen market's valuation may be justified though he cautioned it was at a "potentially fraught level."
"There's a lot of capital that is very ESG-focused chasing a select number of companies that offer this kind of pure play exposure to these future energy trends. So there is a risk that this may unwind."
($1 = 0.8258 euros)
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