The surge in energy demand driven by the rapid advancement of artificial intelligence (AI) technologies has been a significant boon for GE Vernova, the power equipment manufacturer that emerged from General Electric earlier this year. As companies in the tech sector ramp up efforts to build their AI frameworks, the stock of GE Vernova (symbol GEV) has demonstrated impressive performance, nearing historical peaks. This rise aligns closely with the broader trends observed in the S&P 500 Industrial ETF (XLI), as investors eagerly capitalize on the electrification and AI integration narratives propelled by AI chip leader Nvidia (NVDA).
Analyst Daniel Rich from CFRA has highlighted that GE Vernova is benefiting from the broader investment cycle in both AI and energy. With a “Buy” rating and a price target of $230, he emphasizes that the company’s growth trajectory is closely tied to the explosive rise in power requirements that accompanies the tech industry’s extensive infrastructure investments.
Notably, major players in the tech field, including Amazon, Alphabet, Microsoft, and Meta, are projected to allocate a staggering $200 billion combined this year towards cloud and AI initiatives, reinforcing their data center capabilities. Research from consulting firm McKinsey & Company anticipates that the demand for electrical infrastructure technology in the U.S. could more than double by 2030 due to the increasing reliance on AI applications.
Raymond James’ Managing Director Pavel Molchanov has referred to GE Vernova as the “supermarket” of the electric power sector. The company has diversified operations that range from producing natural gas turbines crucial for electricity generation to services that enhance power plants, modernize electric grids, and build wind energy solutions. Molchanov noted that Vernova’s global footprint, with around 30% of its revenues sourced from the U.S., positions it uniquely in the competitive landscape dominated by companies like Siemens Energy, Schneider Electric, and ABB.
The company expects to ramp up production significantly, forecasting the delivery of 70 to 80 heavy-duty gas turbines annually by 2026, a notable increase from the previous average of 55. The demand for power generation solutions is rising as industries increasingly electrify their operations, and electric vehicle (EV) adoption expands, alongside the demands imposed by burgeoning data centers.
The partnership between Microsoft and Constellation Energy to resurrect a nuclear reactor at Three Mile Island exemplifies the growing intersect between tech giants and energy demands. Analysts at Morgan Stanley have recently expressed increased optimism regarding gas-powered facilities integrated with data centers and foresee the announcement of a new co-located data center utilizing Vernova’s gas turbine technology as early as 2025.
Since its inception as a standalone entity, Vernova’s stock has surged over 100%, far outpacing the S&P 500’s 21% year-to-date increase. Challenges remain, particularly in the wind turbine segment, which has faced scrutiny following issues with blade failures on key offshore projects.
Despite the stock’s recent success, cautious analysts warn of overextension, noting that the exuberance surrounding AI-driven investments could lead to valuation concerns. After its rapid climb, Molchanov has adjusted the stock’s rating from “Outperform” to “Market Perform” due to these factors, suggesting a potential need for stabilization.
With a robust recommendation landscape featuring 19 “Buy,” six “Hold,” and two “Sell” ratings, GE Vernova continues to attract interest from investors aiming to leverage the intersection of energy and AI.
As the energy landscape evolves alongside technological advancements, GE Vernova’s trajectory signifies a compelling case for understanding the intricacies of modern power demands in a digital-first world.