U.S. stocks have been swinging as investors debate whether the AI boom is turning into a bubble. Over the past five days, the tech-heavy Nasdaq Composite has declined by approximately 2.4%.
Mixed earnings from companies such as Oracle and Broadcom have added to the AI bubble concern, raising questions about whether massive AI-related spending will translate into returns.
The uncertainty has weighed on shares across the AI supply chain, including companies indirectly tied to the theme.
GE Vernova (GEV), a maker of energy turbines and grid equipment, has also come under pressure. The company has increasingly been viewed as an AI play because of the enormous amount of electricity required to power data centers.
GE Vernova stock is down roughly 15% over the past five days, despite some analysts setting positive tones on the stock.
GE Vernova stock is nearly doubled year-to-date as of Dec. 18.
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“AI is still in the build phase,” Fidelity analyst says
Training AI models and running AI applications consume vast amounts of power, creating growing opportunities for companies involved in power generation and grid infrastructure, according to Clayton Pfannenstiel, co-manager of the Fidelity Select Industrials Portfolio at Fidelity.
Natural gas turbines are one of the most immediate solutions to easing the power bottleneck.
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“If we need power now, the main source is gas turbines,” said Pfannenstiel.
GE Vernova is Pfannenstiel’s fourth-largest holding, accounting for about 5.4% of the portfolio. He said the company is already seeing stronger natural gas turbine orders, prompting management to raise its earnings outlook.
“AI is still in the build phase,” said Pfannenstiel. “There are a lot of ‘picks and shovels’ companies that could potentially benefit.”
AI power demand reshapes GE Vernova’s growth outlook
GE Vernova recently lifted its guidance at its Dec. 9 investor update event. The company now expects revenue to reach $52 billion in 2028, up from $45 billion, with adjusted EBITDA margins expanding from about 9% this year to 20% by 2028.
Management also raised its backlog outlook to $200 billion from $135 billion, driven in part by rapid growth in its electrification business. GE Vernova expects free cash flow to rise to $22 billion from $14 billion between 2025 and 2028.
The company has doubled its dividend to $0.5 per share and increased its share repurchase authorization to $10 billion from $6 billion.
“Electric power will be critical to unlocking economic growth in the decades ahead and we are well-positioned with our large installed base and platform of advanced solutions to serve this growing, long-cycle market,” said GE Vernova CEO Scott Strazik.
Bank of America bullish on GEV stock
Bank of America analyst Andrew Obin has a $804 price target and a buy rating on GE Vernova stocks, citing strong demand for power and grid equipment, according to a Dec. 16 research note sent to TheStreet.
Obin said GE Vernova remains “laser focused on execution” as regulatory (for example, the Environmental Protection Agency is reconsidering air regulations on power plants), data center, and electrification trends all stand in the company’s favor.
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The analyst added that his target multiple for GE Vernova represents a premium to the roughly 14 times peer average on 2026 estimates, reflecting GE Vernova’s stronger financials.
“We argue a premium multiple is warranted given above-peer earnings growth and margin trajectory,” said Obin.
What’s boosting the need for power generation and grid equipment is not just data centers, but also building electrification and electric vehicles, Obin said in an earlier Dec. 10 research note.
“We see data center growth, building electrification, and electric vehicle adoption driving faster electrical load growth. This should drive increased demand for power generation and grid equipment as well as gas power services,” he said.
GE Vernova stock is up roughly 95% year-to-date as of Dec. 18.
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