Artificial intelligence adoption and private investment in renewable energy: Evidence from firm-level data across developed and emerging economies

The rapid integration of Artificial Intelligence (AI) into business operations is transforming global investment dynamics, particularly within the renewable energy sector. This study investigates how AI adoption influences private investment in renewable energy firms, using a comprehensive firm-level panel of 1550 companies across twelve developed and emerging economies from 2016 to 2023. A novel AI adoption index is created using text-mining techniques applied to firms' annual reports, capturing both the breadth and intensity of AI engagement. Employing panel fixed-effects and instrumental variable (IV–2SLS) estimations to address endogeneity concerns, the findings demonstrate that AI adoption significantly enhances firms’ ability to attract private capital by serving as both a productivity tool and a strategic signal of innovation and technological readiness. Strong digital infrastructure and institutional quality amplify the effect, which is more pronounced in technologically dynamic sectors such as solar and wind energy, and among larger firms in developed economies. Moreover, the study identifies a nonlinear (inverted U-shaped) relationship, suggesting that excessive AI intensity may yield diminishing investment benefits. The results remain robust across alternative model specifications and during the COVID-19 period. By linking digital transformation with sustainable finance, the study contributes new theoretical and policy insights, highlighting AI as both a technological enabler and a strategic instrument for accelerating private investment in the global clean energy transition. • AI adoption significantly boosts private investment in renewable energy firms. • Strong institutions and digital infrastructure enhance AI's investment impact. • AI's effect is greater in large firms, solar/wind sectors, and developed economies. • AI's investment impact follows an inverted U-shape, with diminishing returns. • COVID-19 intensified AI's role as a signal of resilience and technological agility.