Data Center & AI Power Boom: A Tailwind for GE Vernova's Gas Turbines?
News Summary
The growth of Artificial Intelligence (AI) is driving increased electricity demand, creating opportunities for GE Vernova's Gas Power business. In April 2025, the International Energy Agency (IEA) reported that AI infrastructure would significantly boost power needs, and with natural gas accounting for roughly a quarter of global electricity generation, this could accelerate GE Vernova's gas turbine sales. GE Vernova's gas turbines serve as primary power sources, backup systems, or hybrid solutions for data centers, meeting high availability and cost-efficiency targets. Its aeroderivative LM2500XPRESS turbines offer quick installation and scalable output, while heavy-duty gas turbines provide reliable, high-output performance. The company secured a July 2025 order to supply 29 LM2500XPRESS units to Crusoe AI data centers. GE Vernova's gas turbine sales improved 213.3% and 11.8% in the second and first quarters of 2025, respectively. Beyond GE Vernova, Siemens Energy and Chevron are also expanding their footprint amid growing power demand from data centers. Siemens Energy partnered with Eaton in June 2025 to enable simultaneous construction of data centers and on-site power generation using its SGT-800 gas turbines. Chevron, in April 2025, partnered with GE Vernova to deliver 4 gigawatts of power by 2027, with GE Vernova providing 7HA gas turbines and Chevron ensuring natural gas supply. Earlier in January, Chevron also joined forces with Engine No. 1 and GE Vernova to develop natural gas-powered solutions for U.S.-based data centers. GE Vernova's shares have surged 239.7% in the past year, but its forward 12-month P/E stands at 55.15X, significantly above the industry average of 20.81X.
Background
The rapid advancement of Artificial Intelligence (AI) is significantly increasing electricity demand globally, particularly from data centers. A major April 2025 report from the International Energy Agency (IEA) highlighted this trend, projecting substantial growth in power needs to support AI infrastructure. With natural gas currently generating approximately a quarter of the world's electricity, gas-fired power companies stand to benefit from this escalating demand. Against this backdrop, GE Vernova's gas turbine business is experiencing a significant opportunity. The company manufactures various types of gas turbines, including the quickly installable and scalable aeroderivative LM2500XPRESS, and high-output heavy-duty gas turbines for larger operations, both designed to meet data centers' high availability and cost-efficiency targets.
In-Depth AI Insights
Given the AI-driven energy demand growth and GE Vernova's strong performance in natural gas power, what are the potential long-term risks and alternative solutions investors should monitor? - While natural gas offers advantages in meeting immediate AI data center power needs (reliability, scalability), its nature as a fossil fuel creates a long-term conflict with increasing global decarbonization pressures. Policy shifts or breakthroughs in renewable energy technologies could accelerate the displacement of gas-fired power. - Data centers' increasing commitment to clean energy might drive demand for hybrid solutions or direct renewable energy options (e.g., large-scale solar + storage), potentially squeezing the market share for traditional gas turbines, even if gas remains the most cost-effective option for baseload and peaking power currently. - Investors should watch GE Vernova's investments and technological advancements in renewable energy (like wind power, though not highlighted here for direct AI data center relevance) and energy storage to assess its long-term adaptability to energy transition trends. To what extent does GE Vernova's current high valuation (P/E 55.15X) reflect an 'AI premium,' and is this premium sustainable? - GE Vernova's elevated P/E ratio clearly reflects strong market expectations for its ability to capture value from AI-driven electricity demand growth. This 'AI premium' is built upon the narrative of the company as a critical enabler for AI infrastructure. - The sustainability of this premium depends on the actual growth rate of AI power demand, GE Vernova's ability to maintain its market leadership, and the progress of competitors (like Siemens Energy) in offering comparable solutions. - If AI growth slows, competition intensifies, or regulatory pressure restricts natural gas power, this premium could be at risk of compression. Investors need to prudently assess if its growth potential justifies the current valuation. Beyond direct equipment sales, how do strategic partnerships, such as those involving GE Vernova and Chevron in the data center energy market, signal an evolution in business models? - These collaborations indicate a shift where energy providers and equipment manufacturers are moving beyond mere product sales to offering more comprehensive 'Energy-as-a-Service' (EaaS) or integrated solutions. Chevron provides natural gas supply, GE Vernova provides power generation technology, collectively meeting data centers' end-to-end energy needs. - This model helps secure long-term revenue streams, reduces energy management complexity for data center operators, and allows each party to leverage their core competencies (e.g., Chevron's fuel expertise and GE Vernova's engineering capabilities) to create shared value. - It could also lead to tighter supply chain integration and stronger customer stickiness, forming competitive moats for the involved parties.