I'm Officially Sounding the Alarm on GE Vernova: Here's What Investors Should Buy Instead

Let me be clear up front: GE Vernova (NYSE: GEV) is a terrific business. Its power-generation and grid equipment sit at the heart of the electrification boom, and its record backlog is real. But the stock has become overvalued, and I am officially sounding the alarm. If you want exposure to the same powerful trend without the sky-high risk, I would buy Quanta Services (NYSE: PWR) instead.

Why I'm alarmed on GE Vernova

Here's the specific problem: the price. GE Vernova trades near $1,071 a share (as of July 20), and against the average analyst forecast for 2027 earnings of about $24.40 per share, that works out to roughly 44 times forward earnings. The stock has soared more than 60% this year alone, and that kind of run leaves a valuation priced for perfection. When expectations get that stretched, even good news can fail to move the stock, while any disappointment tends to hit hard.

Image source: Getty Images.

And there's a concrete reason disappointment is a real risk. GE Vernova's headline number is its enormous order backlog, but a backlog is only a promise until it converts into actual revenue. That conversion is running into genuine obstacles: The U.S. electric grid is congested and slow to upgrade, supply chains for heavy power equipment are bottlenecked, and building and connecting new capacity takes years. If those data center and grid projects slip, or if artificial intelligence (AI)-driven power demand cools even slightly, the revenue the market is counting on could arrive later and messier than expected. At 44 times earnings, the market is already assuming years of flawless execution, which leaves very little cushion. There is simply very little buffer if anything goes wrong.

To be fair, GE Vernova could keep climbing if the build-out stays red-hot. I'm not saying the business is broken. I am saying the risk-reward at this price is badly skewed against new buyers.

What to buy instead: Quanta Services

Quanta Services offers a smarter way to play the identical trend. It's the picks-and-shovels company of electrification, providing the crews, transmission lines, substations, and interconnections that physically link power plants and data centers to the grid. Put simply, you can't deploy all of GE Vernova's turbines without a company like Quanta to wire everything together.

The setup is compelling. Quanta carries a record backlog of its own, near $48.5 billion, and management frames its opportunity as a $2.4 trillion addressable market through the end of the decade. It also owns a rare competitive edge: It trains its own skilled workers through its line worker schools, which matters enormously when labor is the true bottleneck in the entire build-out. At about $630 a share and a 2027 earnings forecast near $16.50, Quanta trades at roughly 38 times forward earnings. That is cheaper than GE Vernova, which means you're paying a more reasonable price for a business that's just as essential to the electrification story.

Quanta isn't risk-free either. Labor shortages could cap its growth, big projects can be delayed, and its stock isn't exactly cheap after its own strong run.

The takeaway for investors

Both companies win if electricity demand keeps surging, so this is not a bet against the theme. It is a bet on risk and reward at today's prices. GE Vernova is a great business whose stock has gotten ahead of itself, while Quanta Services offers the same tailwind at a somewhat lower multiple, with recurring revenue and a genuine labor moat. My honest advice is to resist chasing GE Vernova here and favor the grid builder that makes the whole boom possible.

Another underappreciated detail: A large share of Quanta's work comes through recurring master service agreements rather than one-off projects, giving it steadier, more predictable revenue than a typical contractor. It's also become one of the largest builders of renewable-energy infrastructure, from solar farms to battery storage, so it profits no matter which type of power generation wins.

Micah Zimmerman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends GE Vernova and Quanta Services. The Motley Fool has a disclosure policy.