GE Vernova Inc. (NYSE:GEV) is facing scrutiny over its dependence on artificial intelligence (AI) for driving power demand. Recent analyses have shown mixed sentiments surrounding the company’s future, particularly in light of fluctuating market conditions. On January 12, 2024, Citi adjusted its estimates and raised its price target for GE Vernova from $658 to $708, maintaining a Neutral rating that suggests a 10% upside potential.
This upward revision follows a downgrade from Robert W. Baird analyst Ben Kallo, who moved GE Vernova’s rating from Outperform to Neutral and cut his price target from $816 to $649. These developments highlight the growing concerns regarding the company’s capacity to sustain its stock rally amid fears of oversupply in power capacity.
Market Sentiment Shifts as AI’s Role is Questioned
Some market observers suggest that the demand for GE Vernova’s turbines and related equipment is overly reliant on AI-driven growth. Kallo noted that these worries are “shifting sentiment” towards the company, raising questions about its long-term viability if tech companies struggle to convert AI potential into tangible success.
Despite these challenges, GE Vernova’s leadership remains optimistic. At a recent Investor Day event, CEO Scott Strazik addressed concerns about the company’s reliance on AI, stating, “AI is a real driver for us right now, but it isn’t the only driver.” Strazik emphasized that the company is positioned for growth beyond just AI influences.
In early December, GE Vernova provided a compelling outlook, forecasting its total order backlog to reach approximately $200 billion by the end of 2028, an increase from $135 billion previously. The company is also anticipating improved profit margins within its power and electrification segment, alongside expectations for increased dividends and stock buybacks.
Analysts Remain Divided on GE Vernova’s Future
Following the company’s optimistic update, various analysts have reaffirmed their positions on GE Vernova. Notably, JPMorgan significantly raised its price target from $740 to $1,000, while maintaining a Buy rating on the stock. This indicates a level of confidence in the company’s ability to navigate current market challenges and leverage its strengths.
GE Vernova operates as a purpose-built global energy company, leading the electric power industry with a diverse range of products and services that generate, transmit, convert, and store electricity. The company is structured into three main segments: power, wind, and electrification, each contributing to its overall strategy for growth.
While the potential of GE Vernova remains a topic of discussion among investors, there is a consensus that some AI-focused stocks may offer greater returns in a shorter timeframe. For those exploring investment opportunities, research into alternative AI stocks with high upside potential may be worthwhile.
As the market continues to evolve, GE Vernova’s ability to adapt and expand its offerings will be critical in determining its future success amidst growing scrutiny over its dependence on AI-driven power demand.
