(Bloomberg) — GE Vernova Inc. dropped the most in six months on investor concerns that this year’s 70% stock rally was overdone following comments from Chief Executive Officer Scott Strazik that some worried signaled weakening growth prospects.
Amid an unprecedented boom in AI-driven electricity demand, quarterly results released on Wednesday and subsequent comments by Strazik during a conference call spooked some shareholders who were expecting more enthusiasm going forward.
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“Some of the comments on the call could be perceived as slightly more cautious than, ‘Hey, everything is up and to the right and no one can get enough capacity,’” said Brett Castelli, an equity analyst at Morningstar. “Given the market environment we’re in, every comment is being closely watched.”
Castelli noted two points from Strazik’s call that gave pause to investors. First, Strazik was less than 100% committal about expanding manufacturing capacity when certain order-book thresholds are reached, the analyst said.
Secondly, the CEO estimated capital spending for the power and electrification businesses will peak next year, signaling a shorter growth trajectory than some observers anticipated.
“Investors are looking for commentary that may suggest there is any slowdown or moderation in growth,” Castelli said.
GE Vernova shares plunged as much as 9% before clawing back some of those losses. The daily drop trimmed the year-to-date advance to 74%. Peers such as Vertiv Holdings Co. and Eaton Corp. declined as much as 6.9% and 5.3%, respectively.
A GE Vernova representative declined to comment for this article.
Strazik’s remarks come against a backdrop of soaring global electricity demand as the data centers needed for Big Tech’s AI ambitions soak up energy, along with increasing demand from new factories and moves to electricity additional sectors of the economy. GE Vernova has been a major beneficiary of those trends.
The focus on GE Vernova’s future growth mirrors what analysts will be watching for as the biggest US power companies report earnings later this week. The strongest companies will show how they’ll connect data-center demand to their grids, Jefferies analysts wrote in a note. “The bear case — over‑promised load, capacity prices normalizing, policy whiplash — remains,” they wrote.
GE Vernova also said Wednesday that it expects an increasing number of its natural gas-fired turbines to be snapped up by tech firms building data centers.
About 90% of the company’s current turbine orders are from traditional customers like utilities and independent power producers, with just 10% going to hyperscalers. But hyperscalers account for about one-third of paid reservations among customers still early in the development process, Strazik said in an interview.
“That starts to illustrate for you where the market is going,” he said shortly before the conference call with analysts. Tech firms often finance contracts without being the ultimate operators of the turbines, he added. “They’re stepping in to enable the industry to continue to grow at the pace of the expectations they have.”
On Tuesday, the energy-equipment manufacturer said it agreed to buy a 50% stake in transformer-maker Prolec GE that it doesn’t already own for around $5.3 billion, confirming an earlier Bloomberg report.
GE Vernova saw orders in its power business increase 50% to $7.8 billion year-over-year and orders in its electrification business increase 102% to $5.1 billion.
The company also said its gas power backlog and reservations grew to 62 gigawatts from 55 gigawatts. Prices for its gas turbines are “accelerating” with improving margins for the reservations it expects to translate into orders within the next year, Strazik said.
–With assistance from Matthew Griffin.
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