Tel Aviv Stock Exchange Sees Stellar Year Driven by AI, Energy, and Defense

The Tel Aviv Stock Exchange experienced one of its most successful years on record, with the TA-125 index rising approximately 30% despite ongoing security challenges. However, a select group of five stocks within the index significantly outperformed, with some more than tripling in value.

Doral Energy, a renewable energy developer, led the gains, soaring by about 309%. This surge is attributed to the global demand for electricity, particularly for artificial intelligence data centers, which is driving up electricity prices and the value of Doral's solar and storage projects in Israel and the US. The company is also advancing strategic moves, including a $400 million investment in its US arm for a future IPO and a joint venture for data centers in Israel. Despite its strong performance, Doral trades at high multiples, and much of its optimistic valuation is already priced in.

Tower Semiconductor, a chip manufacturer, saw its stock jump by approximately 214%, fueled by its silicon photonics technology crucial for AI data centers. The company announced significant contracts for 2027 and has expanded its production capacity in Japan. Its primary risk lies in its dependence on a few major clients and sensitivity to slowdowns in AI investments.

Bazan, Israel's largest oil refinery, increased by about 171%. This rise was driven by disrupted global oil markets due to the Iran conflict, which widened refining margins. Bazan reported substantial profits and received a significant insurance payment for war damages. However, refining margins are volatile, the surge is linked to a one-time event, and the refinery is physically vulnerable to attacks.

Real estate group Mega Or, led by Tzachi Nachmias, climbed by approximately 170%. The company has positioned itself as a leader in data centers through its subsidiary Mega DC, securing agreements with major tech firms like Nvidia. Its significant profit increase is largely based on paper gains from revaluations rather than actual rental income, and it trades at a high equity multiple.

Finally, the insurance company Eyalon concluded the year with a jump of about 154%. This growth was a combination of factors, including the booming stock market boosting its investment portfolio, expansion of its core business, and a rebound in its provident and study funds market. A significant portion of its profit increase stems from capital market gains, which are subject to market fluctuations.