Is GE Vernova Stock a Buy Now?

Energy demand is soaring, driven by the rapid growth of power-hungry data centers servicing artificial intelligence (AI) applications. This has created a huge opportunity for GE Vernova (NYSE: GEV) and is a big reason the stock has surged 440% since its 2024 spinoff from General Electric (now GE Aerospace).

According to the Bank of America Institute, U.S. electricity demand is projected to grow at a compound annual rate of 2.5% over the next decade, five times faster than in the previous decade. This surge underscores the pressing need to expand energy infrastructure. In the meantime, those with extensive assets, such as GE Vernova, are in a position to reap the benefits.

With expertise in designing, manufacturing, and servicing solutions for power generation, grid infrastructure, and renewable energy, GE Vernova is ready to meet these evolving needs. As a result, the stock is up significantly and trades at a premium valuation.

Is it still a buy today? Let's dive into the business and the opportunity ahead.

Image source: Getty Images.

GE Vernova's energy advantage

GE Vernova is an independent energy technology company that provides support to the electric system from generation to consumption. It operates a huge fleet of GE-built equipment worldwide, primarily comprising gas, steam, and wind turbines, as well as grid infrastructure. Its installed base generates nearly one-quarter of the world's electricity.

The company produces revenue in several ways. First, it sells core infrastructure for energy production. This includes equipment used in power plants, wind farms, transformers, and wires, among other things.

It also earns recurring fees for maintaining, repairing, and modernizing that infrastructure to ensure power is constantly flowing. This long-term service commitment secures steady, high-margin revenue, shielding it from fluctuations in equipment sales.

Demand for its products and services is exploding

The company projects strong demand for gas turbines, grid equipment, and services driven by the surge in AI power needs. Significant investment and infrastructure development are crucial to meet the predicted growth in energy demand, which is sustained and thus contributes to favorable pricing.

Hyperscalers are increasingly turning to GE Vernova for their power requirements. Orders from these customers have reached $400 million in the third quarter alone. For the full year, the company has booked roughly $900 million in electrification-related orders with hyperscalers, compared to $600 million all of last year.

It also sees continued strength in demand and pricing for power generated by natural gas. The company booked 12 gigawatts (GW) of new contracts in the third quarter, up from its 9 GW secured in the prior quarter. Its power segment's total contractual gas-power commitments (including its backlog and reservation agreements) reached 62 GW in the quarter, up from 55 GW in the previous quarter. It expects to approach 70 GW of contractual gas power commitments by the end of the year.

It also continues to see prices rising in the gas market. The 29 GW held in reservation agreements are priced higher and offer better margins than the 33 GW currently on order. So even before the company delivers these turbines in the future, it already knows it will earn more per unit than from older orders, and future revenue will benefit from this increased pricing.

To meet the robust demand and rising order volume, GE Vernova is investing heavily in capacity. It has installed almost 200 new machines in its gas power factories in 2025 and added about 800 production workers, remaining on track to reach a 20 GW annualized production run rate by next year.

Is GE Vernova a buy?

Investors who buy GE Vernova today will pay a premium valuation. Currently, the stock trades at 87.3 times this year's projected earnings per share (EPS) and 48.1 times 2026's projected EPS. This lofty valuation reflects the company's robust demand, as evidenced by its growing order book, driven by its assets across the energy landscape.

Its high valuation reflects significant optimism about future growth. However, it leaves the stock vulnerable to downside risks with a limited margin of safety. GE Vernova is a compelling stock, attractively positioned to capitalize on rising energy demand, but I'd like to see a more affordable valuation before buying.

Bank of America is an advertising partner of Motley Fool Money. Courtney Carlsen has no position in any of the stocks mentioned. The Motley Fool recommends GE Aerospace and Ge Vernova. The Motley Fool has a disclosure policy.