Policy Push for AI Power Plants Reinforces GE Vernova's Bull Case, but Valuation Concerns Persist

What happened

Trump and several governors are pushing a plan to spur new power plants for AI data centers, which could boost equipment makers like GE Vernova. This aligns with GE Vernova's strategic focus on gas turbines and grid infrastructure, key for meeting rising electricity demand from data centers. However, the stock has already surged, trading at nearly 100x EBITDA and embedding flawless execution of aggressive 2026-2028 growth and margin targets. The DeepValue report notes that any shortfall in EBITDA margins or free cash flow could compress this premium, making the current risk-reward unfavorable. Thus, while the policy news supports demand, it does not alleviate the high valuation and execution risks in the stock.

Implication

The news reinforces structural demand from AI and grid upgrades, potentially supporting backlog and revenue growth for GE Vernova's Power and Electrification segments. However, the stock trades at 99x earnings, leaving no margin of safety as highlighted in the DeepValue report. Investors must monitor for execution risks, such as potential overcapacity and pricing pressure from competitors ramping up production. Key checkpoints include 2026 EBITDA margin reaching at least 11% and free cash flow hitting $4.5-5.0 billion guidance. Until clear evidence of margin expansion and FCF outperformance emerges, avoiding new purchases or trimming positions is prudent.

Thesis delta

The news confirms the demand tailwinds from AI and grid investments, reinforcing the bull narrative but not altering the core valuation concerns. The thesis remains that GE Vernova is overvalued and vulnerable to any operational misses, so trimming or avoiding positions is still advised until evidence of sustained outperformance.