General Electric’s energy division, GE Vernova, has made a striking entrance into the stock market, with its performance following the initial public offering (IPO) on April 2, 2024, vastly surpassing expectations. CEO Scott Strazik, speaking at the company’s inaugural investors’ day in March 2024, expressed confidence about the timing of the launch, pointing to a significant uptick in electricity demand linked to the burgeoning artificial intelligence (AI) data center sector. This expectation is being increasingly recognized by investors, evidenced by Vernova’s stock, which has seen its value skyrocket—more than quadrupling since its debut and securing its position as the second-best performer in the S&P 500 over the past year and a half.
Moving forward, analysts continue to express optimism about Vernova, forecasting an average potential stock price of around $686.68, indicating a 10% upside from recent closing levels. The company is capitalizing on what many believe is just the beginning of a major expansion in AI data centers across the U.S., with Strazik highlighting a surge in power demand not seen since World War II. He emphasized that not only is the overall energy requirement rising, but a larger share of that energy is expected to come from electric sources.
GE Vernova was formed as part of a broader strategy by GE CEO Larry Culp, who aims to streamline the conglomerate into three focused firms: energy, aerospace, and healthcare. Vernova’s establishment consolidates GE’s gas, nuclear, and electric equipment segments, all of which are currently experiencing heightened demand, particularly from data centers keen on expanding their power generation capabilities.
While the gas power segment thrives, with utilities increasingly ordering equipment to meet rising electricity needs, the wind turbine division faces significant headwinds. Despite holding the largest base of onshore wind turbines in the U.S., the segment reported substantial losses and is dealing with economic challenges exacerbated by regulatory uncertainty, especially under the Trump administration’s policies affecting renewables.
Vernova’s gas power business, on the other hand, is booming, with its gas turbines sold out until 2028 and a backlog of 55 gigawatts. Orders for gas turbines have nearly tripled year-on-year, leading to plans for ramping up production significantly by 2026. This high demand environment has also resulted in rising prices for gas power infrastructure. Analysts noted that about 70% of Vernova’s gas power revenue comes from servicing an existing installed base of over 7,000 turbines, a figure expected to grow as utilities aim to upgrade older technology for improved performance.
The electric equipment market is also strong, reflecting a surge in orders from data centers, further bolstering Vernova’s position in the market. Strazik indicated expectations of over $1 billion in new orders from data centers in 2025, showcasing Vernova’s alignment with current tech demands.
In addition to gas and electricity, the company is eyeing nuclear energy opportunities. Strazik highlighted the potential to add five gigawatts of nuclear power in the U.S. over the decade, primarily through upgrades of existing GE-equipped plants and the introduction of new advanced small reactors. These ventures could generate over $2 billion annually by the mid-2030s, aiming to establish a stronger foothold in the nuclear energy market.
However, the challenges for the wind business persist, with substantial losses reported in 2024. Vernova is now re-evaluating its commitment to offshore wind projects due to economic pressures and delays resulting from regulatory complexities.
In summary, as GE Vernova navigates its way through a rapidly changing energy landscape, the company’s robust positioning within gas and nuclear sectors, coupled with strategic foresight in meeting rising electric demand, marks a promising trajectory despite ongoing struggles in renewables. The combination of evolving technology landscapes and growing energy needs presents both challenges and opportunities as the company adapts to capitalize on the shifting market dynamics.
