GE Vernova Fell 25% on Data Center Fears. Only About 20% of Its Gas Turbine Customers Are Data Centers. Time to Buy?

The dust from last week's rout of AI-related stocks is settling. But the damage is done. Confidence in these companies' foreseeable futures is weakened. Even names outside the heart of artificial intelligence mania have been upended. Take GE Vernova (NYSE: GEV), for instance, which simply makes power-generating equipment used by some AI data center owners. Shares of this industrial outfit are down 25% since their early October high, with much of this setback materializing just this month following concerning quarterly reports from Alphabet and Nvidia.

There may be some degree of misunderstanding regarding GE Vernova's business, however, that needs to be clarified.

An important detail

You may be aware that GE Vernova manufactures a number of power-related solutions, ranging from transformers to wind turbines to hydropower equipment. But its leading product line right now is natural gas turbines, accounting for most of last quarter's $6.1 billion in revenue from its power division, which was nearly half of its total top line of $12.6 billion. Sales of this arm's wares improved 25% year over year, while orders for future deliveries of power equipment -- still mostly natural gas turbines -- jumped 178% to $21.8 billion.

Yes, artificial intelligence data centers are now using gas turbines as secondary or even primary power sources, and yes, some data center owners and operators are purchasing this equipment from GE Vernova. That's why its stock's been so vulnerable to worries of a sudden slowdown in AI's anticipated growth.

Image source: Getty Images.

Just don't lose perspective on the matter. As CEO Scott Strazik said of Vernova's power division in last month's third-quarter conference call, "Demand also remains diverse, with approximately 100 customers in 25 different countries, of which approximately 80% are traditional customers and 20% are for data centers."

In other words, GE Vernova isn't nearly as vulnerable to a contraction in artificial intelligence capital spending as the stock's recent sell-off suggests.

Tailwind outside of AI

There's some nuance to consider. While most of GE Vernova's gas turbine buyers are more traditional institutions like utility companies, many of these buyers are still purchasing this equipment to provide electricity to data centers. As Goldman Sachs notes, data center demand for power alone is set to more than double between last year and the end of 2027.

Artificial intelligence only accounts for a small portion of the nation's and the planet's ever-growing need for electricity, however. Goldman's outlook adds that even at peak consumption, AI data centers will still only require 8.5% of next year's domestic power-production potential. The rest is rooted in longer-established and growing needs, increasingly including charging electric vehicles.

Most investors also know utility companies here and abroad aren't actually in a great position to meet this future demand with their current production capabilities. They need more capacity, and natural gas turbines are a quick, proven, and environmentally friendly option. To this end, S&P Global notes that orders for gas turbines reached a 20-year high of more than gigawatts last year. For perspective on that figure, GE Vernova has signed 52 gigawatts of new gas power agreements through the first three quarters of 2026, and expects to have at least 130 gigawatts under contract by the end of the year.

Connect the dots. This ticker's recent sell-off is a buying opportunity.

James Brumley has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, GE Vernova, Goldman Sachs Group, Nvidia, and S&P Global. The Motley Fool has a disclosure policy.