GE Vernova finds itself in the middle of the frantic race to build out AI
The AI boom has presented energy stalwarts like GE Vernova with a monumental task — and opportunity: Make enough gas turbines to support an entire technological revolution. As tech giants invest billions of dollars to build AI data centers, a shortage of power has emerged as a new and unexpected bottleneck. In the initial wake of ChatGPT’s launch in late 2022, the main supply crunch was for Nvidia’s graphics processing units, which has moderated. Now, the biggest demand is for energy, putting GE Vernova, one of the world’s largest producers of gas-fired turbines used to create electricity, at the center of a frantic race to build out generative AI infrastructure. Gas turbine orders from utilities, independent power producers, and industrial players are on a record-breaking pace for 2025, according to a S & P Global Commodity Insights. Think of these turbines as huge modified engines located at power plants that burn natural gas to make a lot of electricity very quickly. Manufacturing them is a complex process, and right now supplies are tight. “You may have trouble getting GPUs,” Jim Cramer said. “Try getting power from GE Vernova.” The fervent demand for GE Vernova’s turbines is leading to a financial windfall, as its recent blowout quarterly earnings release made clear. So strong was the report that, in response, Jim described the industrial stock as “maybe the best story in the entire market.” Shares of GE Vernova have doubled year to date and are on pace for a fresh record close Monday around $662 a share. Following earnings, the Club raised its price target by $150 on GE Vernova to $700 a share. Orders for its power segment rose 44% organically last quarter as gas power equipment orders, in particular, increased nearly threefold. Meanwhile, a measure of multiyear demand that includes both gas-turbine orders and “slot reservations,” which will be fulfilled further into the future, increased to 55 gigawatts, up from 50 in April. By year-end, GE Vernova expects that to be at least 60 gigawatts — for context, if the Hoover Dam were running at max capacity, it could produce roughly 2 gigawatts of power . This “era of accelerated electrification is driving unprecedented investment,” CEO Scott Strazik said on the conference call. GEV YTD mountain GE Vernova’s year-to-date stock performance. The unprecedented investment is also testing the limits of the power industry. Demand for GE Vernova’s turbines — and those from peers like Siemens Energy and Mitsubishi Power — are so large that it’s hard for them to keep pace. GE Vernova’s gas turbines are “largely sold out” for 2026 and 2027, while the company is “approaching filling out ’28 and starting to sign agreements for later years,” Strazik said in an earnings call this spring. In other words, customers placing new orders for these heavy-duty gas turbines can face wait times that extend several years. With strong demand and limited supply, turbine prices have jumped in recent years as well. The reason there’s so much need for these turbines is simple: the U.S. needs a lot more electricity to keep up with the demand of AI computing. Club holdings Amazon , Microsoft and other hyperscalers seemingly cannot spend enough money to construct more power-hungry data centers. Alongside earnings last week, Microsoft and Meta reported massive capital expenditures on the back of increased AI investments and signaled that more outlays are on the way. “This is the number one driver of new [turbine] demand growth, especially in the near term,” said Sam Huntington, director of North American power research at S & P Global Commodity Insights. “For decades, we had this long period of flat [and] minimal load growth, right up to the past couple of years, and now, the situation has changed again,” he told CNBC. Bank of America analysts in a July note forecasted that U.S. electricity demand will grow at a 2.5% compound annual growth rate through 2035, up from half a percent between 2014 and 2024. Many energy executives say more natural gas will be necessary to meet the electricity demand, given some current limitations around solar and wind. Even though projections point to more turbine demand, expanding manufacturing capacity isn’t an easy fix. These turbines are massive and complex machinery that can take years to get to customers , so management teams want to make sure that this AI data center buildout is durable before they commit to dramatically scaling up their own production. “They have to balance not building enough to meet data center electricity demand in the future versus making irreversible investment decisions today that might end up costing companies a lot of money over the next 30 years if demand doesn’t show up,” said Ramteen Sioshansi, an engineering professor at Carnegie Mellon University who leads its Electricity Industry Center. The industry doesn’t want a repeat of the early 2000s when there was a similar hype cycle around natural gas power plant construction that ended poorly. Lower natural gas prices — coupled with growing environmental concerns that led to more interest in cleaner alternatives to coal — meant a boom in demand for these turbines at the time. But when gas prices rose again and the collapse of Enron made it harder for power producers to finance new plant construction , demand for gas turbines dried up, leaving manufacturers including GE Vernova — then part of the General Electric conglomerate — with canceled orders and excess inventory. “This led to a huge boom and bust market and people lost a lot of money,” S & P Global’s Huntington added. “So, there’s still scars of 20 years ago [that] are relatively fresh.” Plus, in the years leading up to the AI boom, major investments into renewable energy sources like wind and solar around the world also disincentivized turbine manufacturers from expanding their production capacity. That context helps explain why companies like GE Vernova may not want to open up the check book and spend wildly to expand output. At the same time, GE Vernova must maintain a healthy production pace while keeping its customers happy. “I think there’s a sense at [GE Vernova] that, ‘We’re winning the deals that we want to win and, and we don’t see a need to potentially risk over-capacitizing the market chasing demand,'” RBC Capital Markets analyst Chris Dendrinos told CNBC. Still, Dendrinos said GE Vernova was “an early mover in terms of expanding capacity” in the industry. In January, GE Vernova announced a $600 million investment in U.S. factories over the next two years to address the growing need for electricity. Of that capital, $300 million is specifically going to support the buildout of its gas turbine business by expanding facilities. It is expected to create more than 850 new jobs. Dendrinos, who has covered the energy sector for over a decade, described the $600 million investment as “absolutely material” and “a testament to the demand” for its turbines. GE Vernova’s peers are ramping up production, too. On a February earnings call, Siemens Energy CEO Christian Bruchs said the company is working to grow production capacity by roughly 30%. “However, we take a measured approach and expand our capacities in a responsible way, neither losing sight of cost nor the risk of adding too much capacity,” the executive said on the call. Along with the committed capital, GE Vernova has announced deals to expedite production and promoted alternatives to its heavy-duty turbines to maintain its dominance in the industry and please customers. In March, for example, the firm announced an acquisition of Woodward’s heavy-duty gas combustion parts business for an undisclosed amount. The move is intended to help the company “meet growing energy demands from load growth,” according to a press release. By buying this business, it brings manufacturing of essential combustion parts for these gas turbines in house, which gives GE Vernova more control over its supply chain. Meanwhile, GE Vernova has also touted temporary alternatives to its heavy-duty turbines such as as its “aeroderivative” units. These are mostly preassembled, have faster start times and take up less space than their heavy-duty counterparts. On the other hand, aeroderivatives are less efficient at scale for data centers. GE Vernova announced in March that the company secured an order for three of these units for a municipal utility in Missouri. Overall, GE Vernova is a stellar position to capitalize on the data center buildout. However, Jim said the company could afford to further expand production in order to meet booming demand. “[Their] orders are so strong and ironclad, I wish [they’d] spend some more,” he said. (Jim Cramer’s Charitable Trust is long GEV, NVDA, AMZN, MSFT. See here for a full list of the stocks.) 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