GE Vernova's gas turbines aren't the only way it's winning from the AI boom
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CNBC Finance
8 min read
For more than a year, GE Vernova 's rally has been fueled by one narrative: hyperscalers' insatiable appetite for its gas turbines to supply power to data centers. Look past the headlines, however, and you'll find a lesser-known part of the company that is quickly emerging as a critical piece of the AI buildout. GE Vernova's electrification division, which manufactures the transformers, switchgear, and grid software required to connect data centers to the broader electrical grid, has quietly become the company's fastest-growing business. In the first quarter of 2026, the segment booked $2.4 billion in data center equipment orders, exceeding the total for fiscal year 2025. "[It] doesn't get talked about enough," said Jeff Marks, the Investing Club's director of portfolio analysis. "Everyone thinks of the company as a heavy-duty turbine business, but modernizing the grid to support an increasingly electrified world presents a significant opportunity." Electrification accounted for nearly 32% of overall revenue last quarter. Power, which makes the popular gas turbines that support the AI buildout, is the company's largest segment, bringing in over 53% of revenue. Meanwhile, wind is the smallest and accounted for about 15% last quarter. Much of that comes from sales of offshore and onshore wind turbines. However, electrification has quietly ballooned into a juggernaut with a $42 billion backlog, up from just $9 billion at the end of 2022. For comparison, GE Vernova reported a total backlog of $163 billion at the end of the March quarter, but expects that figure to hit $200 billion by the end of 2027. Driving that growth is the accelerating demand for electricity, following nearly two decades of relatively flat growth. While modernizing an aging grid and manufacturing reshoring play a part, the AI boom is causing the most significant spike in power demand. Consulting firm ICF forecasts a nearly 39% jump in U.S. electricity demand by 2035 as a result. That's because tech companies are investing billions to build out energy-intensive data centers to meet their AI ambitions. Club holdings and hyperscalers Meta Platforms , Alphabet , Amazon , and Microsoft have all aggressively raised capital expenditures to keep pace in the heated AI arms race. Rather than generating power (the job of those aforementioned gas turbines within the power division), the electrification business builds the infrastructure needed to transport electricity from where it is generated to where it is consumed. "There is a terrific demand from the hyperscalers to get connected faster than the power utilities are capable of doing," GE Vernova electrification CEO Philippe Piron told CNBC in an interview. GE Vernova further expanded its electrification business in February by acquiring the remaining stake of transformer manufacturer Prolec for $5 billion. Transformers act as the vital link to these data centers, fueling a massive wave of new orders for the segment. GE Vernova can now better compete with the likes of Siemens and Hitachi . It's a huge opportunity for GE Vernova because electrical transformers are currently among the most sought-after pieces of equipment. Lead times for large power transformers can stretch for years due to unprecedented energy demand. Piron explained the benefits of acquiring Prolec, calling it "a very important move" for GE Vernova, given that transformers are "one of the workhorses" of electrification solutions. And by owning Prolec outright, GE Vernova gains full control over all of its factories. Management can, in turn, control its supply chain more closely, expand production capacity, and improve lead times without having to navigate a joint-venture board. Piron said that since the acquisition announcement, Prolec's load backlog has "elevated rapidly." It's not the first time GE Vernova has adapted its business to curry favor from Wall Street. After years of the market underappreciating the business when it was a part of General Electric, GE Vernova spun off as a stand-alone entity in April 2024. Since then, investors have treated the industrial stock as a pick-and-shovel AI play instead of a lagging conglomerate. Wall Street quickly recognized that Big Tech players' aggressive spending on data centers would benefit the power division. In fact, the stock has jumped over 694% since going public a little over two years ago and has gained almost 70% in 2026 alone. GE Vernova shares have surged this year on a series of monster quarterly earnings beats and positive analyst calls as sales for that crucial power division continue to climb. "This one may be one for the ages," Jim Cramer said after GE Vernova's beat-and-raise quarter in April, where power revenue jumped 10% for the three-month period and topped expectations. CEO Scott Strazik said the current quarter was off to a strong start as well. "Quarter to date, we have booked more power equipment orders in terms of value than we did in all of Q1 2026," he said. The stock jumped nearly 14% on the print. Barclays, Goldman Sachs, Jefferies, Baird, Guggenheim, TD Cowen, Oppenheimer, and other firms came out and raised their price targets on the Club holding in the days that followed. Guggenheim pointed to "strong order growth" in power and said that GE Vernova has the potential to return "substantially more capital to shareholders than the market currently appreciates." Mizuho analyst Maheep Mandloi said that while turbines remain the top draw for most investors, "we're definitely seeing more interest in electrification," Mandloi told CNBC. "On the turbines, they are pretty much sold out until 2028. There's not much upside to the revenue estimates through 2030," he said. "Electrification, on the other hand, has potential upside [to the company's guidance and estimates]." The power division gained even more recognition last month. The stock rose roughly 2% on June 22 after investors learned that GE Vernova's natural gas turbines would power a long-term energy purchase agreement between Microsoft and Chevron . That's a boon for sales in the power business. Bernstein analyst Sunaina Ocalan called the announcement "just another proof point of the enormous power demand that we're seeing" amid the AI boom. " Higher demand is driving better pricing power for GE Vernova that is translating into margin expansion," Ocalan told CNBC. And as AI adoption skyrockets, these data centers will require even more power. Good news for investors: GE Vernova is wisely positioning itself to capitalize on the trend. Beyond selling Prolec transformers for grid connectivity, the company is designing more advanced solutions to keep pace with the evolving industry. Data centers operated by hyperscalers typically consume 20 to 100 megawatts of power. However, as AI workloads become more energy-intensive and facilities grow in size, some are reaching capacities of 1 gigawatt or more. One gigawatt is equivalent to 1,000 megawatts, which can power roughly 750,000 to 1 million households. Meta announced in March that its El Paso data center will expand to 1 gigawatt. Piron said GE Vernova is just "at the beginning" of the company's plan to capitalize on this trend, though. "Most of our orders have been up to now very much bullish on the grid connectivity, but the power stability and the power distribution are going to see big momentum in the coming years," he added. "When you are starting to get data centers above 1 gigawatt, then you are entering into a new domain where what was applicable before cannot be any longer. And that's where we are bringing a solution." One new solution? GE Vernova announced the rollout of GridOS for Transmission in early June. It is used to help data center operators transmit more power over existing lines without waiting to build new physical infrastructure. Bottom line GE Vernova's power business is a primary reason we took a position in the stock. But the electrification division and its explosive growth are the icing on the cake. It is highly encouraging to see yet another segment within the manufacturer thrive. It really seems like GE Vernova's order growth couldn't get any stronger. That's with the exception of its wind division, which remains by far its smallest in terms of revenue. The fundamentals for GE Vernova remain outstanding, as do those underpinning the AI boom. The company's massive backlog and the persistent demand for both its turbines and electrification solutions remain unmatched. Its dominance in energy markets also gives the company enormous pricing power. After all, roughly 25% of the world's electricity comes from GE Vernova. The Club has a buy-equivalent 1 rating and a $1,300 price target, implying a more than 14% upside from Wednesday's close. (Jim Cramer's Charitable Trust is long GEV, AMZN, MSFT, META, GOOGL. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
