GE Vernova (GEV) is the premier utility stock to own amid the escalating AI infrastructure surge. As data centers multiply to fuel generative AI, the biggest hurdle isn’t chips or servers – it’s reliable, scalable power.
The energy tech giant was spun off from the old General Electric in 2024 and is perfectly positioned to resolve these constraints through its expertise in power generation, advanced grid solutions, and electrification technologies.
GEV’s third-quarter results underscored its momentum, with organic revenue climbing 10% year-over-year and margins expanding to 8% to 9%. Orders in the electrification segment skyrocketed, doubling to $5.1 billion, while the overall backlog swelled to $135 billion, providing years of revenue visibility.
Hyperscaler clients – the tech behemoths building massive AI facilities – drove $400 million in orders during the quarter alone, pushing year-to-date totals to $900 million, nearly double last year’s full-year figure. These partnerships highlight GE Vernova’s role in delivering the stable, high-capacity energy systems that AI demands, from gas turbines and wind farms to cutting-edge transformers and high-voltage direct current (HVDC) lines.
Overcoming AI’s Power Crunch with Strategic Innovations
The AI boom is devouring electricity at an unprecedented rate. Projections show data centers could account for 6.7% to 12% of U.S. power consumption by 2028 – equivalent to lighting up 24 million homes.
Microsoft (MSFT) CEO Satya Nadella recently echoed this, stating that energy availability, not compute, is the true bottleneck for expansion. GE Vernova tackles this head-on with integrated solutions that modernize aging grids and integrate renewables seamlessly.
A game-changer is the recent full acquisition of Prolec GE, a joint venture that ramps up transformer production for utilities, industrial sites, and data centers. This move injects $3 billion in annual revenue at robust 25% EBITDA margins, delivering immediate earnings accretion. Facilities like the expanded Charleroi plant are doubling output to meet surging needs, while innovations such as synchronous condensers bolster grid stability against the intermittency of solar and wind.
In North America, Europe, and the Middle East, demand for these upgrades is exploding, as hyperscalers seek resilient infrastructure to support their AI ambitions without blackouts or delays.
Dividend Boost and Buybacks Ignite Investor Enthusiasm
In a shareholder-friendly masterstroke, GE Vernova just doubled its quarterly dividend to $0.50 per share, signaling the utility’s rock-solid cash flow confidence.
The company also hiked its stock buyback authorization by $10 billion and elevated long-term earnings and margin guidance, projecting sustained double-digit growth and margins in the mid-teens. This capital return blitz has propelled shares more than 10% higher in premarket trading this morning, extending a 80% rally over the past year.
Although it trades at a forward P/E of 50, well above utility peers, GE Vernova appears undervalued for its growth trajectory. As AI investments pour in – potentially trillions for data center buildouts – the company’s $26 billion electrification backlog positions it for outsized gains. For investors eyeing the AI theme beyond semiconductors, this utility powerhouse offers defensive stability with explosive upside, making it a must-own in portfolios chasing the next tech wave.
— Rich Duprey
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Source: Money Morning