GE Vernova Faces Significant Stock Decline Amid Growth Concerns
(Bloomberg) — GE Vernova experienced its largest drop in six months, with investors expressing concerns that the stock’s impressive 70% surge this year might be overinflated. Chief Executive Scott Strzyk mentioned certain worries reflecting potential weakening in growth outlook.
During Wednesday’s quarterly results and following conference call, Strzyk’s comments caught some shareholders off guard, especially those who anticipated a more positive outlook amid a booming demand for AI-driven power.
Brett Castelli, an equity analyst at Morningstar, noted, “Some of the remarks from the conference call could be seen as more cautious than the sentiment of ‘Everything is fantastic and demand will exceed capacity.'” He pointed out that, given the current market conditions, investors are scrutinizing all statements closely.
Castelli highlighted two points that made investors uneasy during the call. Firstly, Strzyk didn’t show full commitment to increasing manufacturing capacity if certain order thresholds were met. Secondly, the CEO projected that capital spending in power and electrification would peak next year, hinting at a shorter growth trajectory than previously expected.
“Investors are watching for signs of deceleration or slowing growth,” Castelli remarked.
Following these developments, GE Vernova’s stock plunged as much as 9% before recovering some ground. Even with the decline, its year-to-date increase is now at 74%. Other industry players like Vertiv Holdings and Eaton also saw drops of 6.9% and 5.3%, respectively.
A representative from GE Vernova opted not to comment on the situation.
Strzyk’s remarks come at a time when global power demand is rising sharply. Data centers, essential for Big Tech’s AI projects, require significant energy, alongside increased demand from new factories and a shift in powering various economic sectors. GE Vernova has been a major beneficiary of these trends.
As analysts keep a close eye on GE Vernova’s future growth, especially with the U.S. power company set to release earnings later this week, Jefferies analysts noted that leading companies will need to show how they connect data center demand with their power grids. They commented on the ongoing weak conditions, including promised load, normalizing capacity prices, and policy challenges.
On Wednesday, GE Vernova also indicated that it anticipates a rise in its natural gas-fired turbines as tech companies invest in new data centers.
Although around 90% of the company’s current turbine orders come from traditional customers like utilities and independent producers, only 10% are directed toward hyperscalers. However, Strzyk mentioned in an interview that these hyperscalers represent about a third of paid bookings from customers still early in the development phase. “This starts to reveal the market direction,” he said right before the call with analysts, adding that tech firms often finance contracts but aren’t typically the final operators of the turbines. “They are stepping in to ensure the industry can keep growing at the anticipated pace.”
On Tuesday, GE Vernova announced an agreement to acquire the remaining 50% stake it doesn’t own in transformer maker Prorec GE for approximately $5.3 billion, confirming earlier reports.
The company reported a 50% year-on-year increase in power business orders to $7.8 billion, while electrification business orders surged by 102% to $5.1 billion.
Furthermore, GE Vernova’s gas power generation backlog and reservations rose from 55 gigawatts to 62 gigawatts. Strzyk mentioned that gas turbine prices are “accelerating,” and margins on bookings are improving, which he believes will lead to more orders in the coming year.
