As Big Tech companies rush to build out AI infrastructure, massive energy demands are a tailwind for GE Vernova (GEV), the power equipment maker that spun off from the iconic GE earlier this year.
The Cambridge, Massachusetts-based company’s stock has climbed along with the broader S&P 500 Industrial ETF (XLI) as investors look to capitalize on electrification and artificial intelligence themes led by AI chip giant Nvidia. It is trending near the all-time high (NVDA).
CFRA analyst Daniel Rich told Yahoo Finance that “(Vernova) appears to be caught up in a broader trade of AI and power demand.” The company’s rating is “buy” and the price target is $230.
Much of Wall Street’s bullishness stems from expectations for power demand growth stemming from Big Tech companies’ efforts to record infrastructure technology spending.
Amazon (AMZN), Alphabet (GOOGL), Microsoft (MSFT), and Meta (META) are expected to spend a total of $200 billion in cloud and AI investments this year, including building and maintaining data centers.
According to consulting firm McKinsey & Company, electricity demand from infrastructure technologies in the United States is expected to more than double by 2030 due to the use of AI.
“If the predictions for powering data centers are accurate, Vernova is a clear winner because even more power is needed to power AI applications,” he added.
One Wall Street analyst called the $72 billion company the “supermarket” of the power industry, which handles everything from the natural gas turbines used to generate electricity to the maintenance of power plants, modernizing the power grid and building wind turbines. I called it.
“This company can do anything,” Raymond James Managing Director Pavel Molchanov said in an interview with Yahoo Finance this week.
“Building power infrastructure is a story of all of the above, which means we will need all of these solutions,” he added.
Analysts note that Vernova’s reach is global, with about 30% of its revenue coming from the United States. Some of its major competitors, including Siemens Energy, Schneider Electric and ABB, are based overseas.
Bellnova expects to deliver 70 to 80 large gas turbines a year in 2026, up from about 55 in recent years. The servicing of these units is also expected to increase significantly.
“Manufacturing growth, industrial electrification, EVs and new data center needs are driving demand for power generation,” Vernova CEO Scott Strazik said during the company’s latest earnings call over the summer.
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A recent agreement between software giant Microsoft and nuclear power provider Constellation Energy (CEG) to restart a nuclear reactor at Three Mile Island in Pennsylvania is the latest sign of growing energy demand among Big Tech companies. Here’s an example.
The partnership makes Morgan Stanley analysts more bullish on the outlook for the gas-powered power plant adjacent to the data center.
“We believe a combined data center and gas-fired power plant utilizing GEV’s gas turbine facilities could be announced in 2025,” Morgan Stanley analyst Andrew Percoco said in a note last week. ” he said.
The analyst reiterated his Overweight rating and raised his bullish scenario price target for the stock from $371 to $397.
Vernova stock is up more than 100% since the spinoff, compared to a 21% year-to-date gain for the S&P 500 Index (^GSPC). That’s despite negative headlines for wind turbines, the company’s most troubled division, after a blade breakage incident at a major offshore project.
However, Raymond James’ Molchanov warned that a strong run-up could mean there was little room to run.
“This is an S&P 500 stock that has doubled in the last six months. If that sounds a little bit like other AI companies that people are familiar with, that’s no coincidence,” Molchanov said. spoke.
Calling the AI-driven rally “overdone,” the analyst and his team downgraded the stock from Outperform to Market Perform based on valuation. Much of the enthusiasm for AI is already built into Vernova’s stock price, he said.
“In short, we believe the stock may enter a period of consolidation after a sentiment-driven rally, and we look forward to reconsidering our rating if trading becomes weaker,” he said. .
This stock has 19 analyst recommendations, 6 buys and 2 sells.
Ines Ferre is a senior business reporter at Yahoo Finance. Follow @ines_ferre on Twitter.
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