Need to Know: This industry could be worth $180 billion by 2040. Citigroup offers four stock names to play it, and a few more to think about.

And that’s where we’re headed with our call of the day from Citigroup, whose strategists have stock ideas to play what they expect will be one of the ten fastest-growing markets through 2040.

They are talking about the global fuel cell industry, a direct play on the green energy debate, and “reaching the part that batteries cannot.”

“Fuel cells enable both de-carbonization and energy resilience, and we see them as crucial in harder-to-abate sectors like commercial vehicles and marine,” a Citi team led by research analyst Martin Wilkie told clients in a note on Tuesday.

Their base case sees this market reaching 50 gigawatts (GW) and $40 billion by 2030, offering a compound average growth rate of more than 35% in dollar terms, with further acceleration to 500GW/$180 billion by 2040.

They admit they’re on the bullish side with these projections, and note fuel cell stocks are on average down around 70% since their January 2021 peaks . 

“The fuel cell equity story has had false starts before, but we see the impetus from emissions policy as well as announced hydrogen plans as creating attractive opportunities,” said the Citi analysts, highlighting policies such as the U.S. Inflation Reduction Act, which aims at beefing up renewable energy and a recent EU move to offer more green-energy research and development subsidies.

While passenger cars were a big source of demand for the growing fuel cell market in 2021, they don’t think it can be a big competitor to battery electric. However, stationary power, such as distributed and backup power generation and heavy-duty transport, think commercial vehicles, off-road and later marine are set to become key fuel-cell markets.

U.K.-based Ceres Power
CWR,
-2.28%,
Plug Power
PLUG,
-0.25%,
Belgium’s Umicore
UMI,
-1.72%,
and Japan’s Toyota
7203,
-0.96%

TM,
-0.73%
are Citi’s buy-rated stocks with high exposure to the fuel-cell theme.

Other names they mention, include Daimler Truck
DTG,
+1.73%
and Volvo
VOLV.B,
+0.23%

VOLV.A,
+0.12%,
which are working with Germany’s Traton
8TRA,
-2.01%
on a joint venture called Cellcentric that aims to develop that technology for trucks, with a production goal of 2025. Others are outsourcing fuel-cell tech, such as Italy’s Iveco Group
IVG,
+0.14%,
which has teamed up with South Korea’s Hyundai
005380,
-4.27%,
and U.S.-based Paccar
PCAR,
+0.23%
with Toyota
TM,
-0.73%.

The markets

Stock futures
ES00,
-0.34%

YM00,
-0.18%

NQ00,
-0.47%
have pared some losses, while bond yields
TMUBMUSD10Y,
3.919%

TMUBMUSD02Y,
4.303%
are mixed, and the dollar
DXY,
-0.07%
has turned lower. Oil prices
CL.1,
-1.91%
are also pressure.

The buzz

Shares of the world’s biggest chip maker, TSMC
2330,
-8.33%,
fell 8% in Taiwan
Y9999,
-4.35%,
where stocks dropped more than 4% following new limits by the U.S. imposed on exports of semiconductors and chip-making equipment to China.

The Bank of England made the second move this week to calm jittery markets, saying Tuesday it will expand its bond purchases to index-linked U.K. bond. But the program still ends Friday, something the pensions fund industry wants to see extended. Those yields
TMBMKGB-10Y,
4.432%
TMBMKGB-30Y,
4.702%,
meanwhile, continue to creep higher.

The National Federation of Independent Business small-business index showed confidence rising in September, but inflation a nagging problem. At noon Eastern we’ll hear from Cleveland Fed President Loretta Mester.

Subscription-based private aviation company Flexjet plans to go public through a merger with SPAC Horizon Acquisition
HZON,

valuing it at $3.1 billion.

The U.S.’s third-biggest railroad union will be back at the negotiating table with employers on Tuesday, after rejecting a deal and raising the possibility of crippling strikes.

The Kremlin’s war hawks were thrilled at the devastating strikes across Ukraine on Monday. Now they want more. G-7 leaders are holding an emergency meeting to discuss the ramping up of the war.

Amazon’s
AMZN,
-0.78%
second Prime-Day like event kicks off Tuesday.

Best of the web

U.K. spy chief says Russians are starting to realize the cost of Putin’s war in Ukraine

India’s biodegradable bags are in demand, and reviving its industry

We are not at peace. The world needs to get ready for more sabotage

One of the greatest transfers of intergenerational wealth is coming, says head of TIAA

The chart

This graphic by Visual Capitalist’s Truman Du, shows Disney’s
DIS,
-2.06%
streaming empire — Disney+, Hulu, ESPN+ — is “giving Netflix
NFLX,
+2.33%
a run for its money.”

The tickers

These were the top searched tickers on MarketWatch as of 6 a.m. Eastern Time:

Random reads

Everyone hail to this 2,560-pound pumpkin.

“Where’s Tony gone?” Supply-chain woes hit (shudder) Frosted Flakes.

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

Listen to the Best New Ideas in Money podcast with MarketWatch reporter Charles Passy and economist Stephanie Kelton.