GE Vernova's AI-Driven Growth Clashes with Lofty Valuation

What happened

A Seeking Alpha article published on December 29, 2025, rates GE Vernova a 'Buy,' citing rapid earnings growth and its critical role in AI-driven power infrastructure, with Q3 results showing 10% organic revenue growth, margin expansion, and a $135 billion backlog. Investor Day guidance further fueled optimism by raising 2028 revenue targets to $52 billion, EBITDA margin to 20%, and announcing a doubled dividend with $1 billion capex for Electrification. However, DeepValue's master report reveals the stock trades at ~108x TTM EPS and ~107x EV/EBITDA, approximately 7x a conservative DCF estimate of ~$84 per share, indicating it is priced for flawless execution. Key risks from filings include ongoing Wind segment losses, a $300-400 million tariff impact in 2025, and execution challenges in capital-intensive offshore projects like Vineyard Wind 1. Thus, while the growth narrative is strong, the valuation leaves little margin of safety and makes the stock vulnerable to multiple compression if any setbacks occur.

Implication

The AI boom and energy transition tailwinds bolster GE Vernova's long-term prospects, as reflected in raised guidance and backlog strength. However, with the stock up ~97% over the past year and trading at rich multiples, much of this optimism is already priced in, limiting upside. Execution on Wind turnaround and offshore projects is critical; failures could lead to guidance cuts and stock declines due to high sensitivity to policy and cost overruns. Investors should closely monitor quarterly free cash flow, Wind segment performance, and tariff impacts to assess if growth justifies the premium. For value-oriented investors, waiting for a valuation reset or clearer signs of sustainable profitability may be prudent to avoid downside risk from multiple compression.

Thesis delta

The Seeking Alpha article reinforces GE Vernova's growth narrative from AI and infrastructure demand, aligning with the report's acknowledgment of a high-quality franchise. However, it does not address the core valuation concerns, leaving the thesis unchanged that the stock is overpriced relative to fundamentals and risks. Therefore, the 'POTENTIAL SELL' stance remains until valuation moderates or execution proves more robust without setbacks.