GE Vernova's Electrification Backlog Surge Faces Skepticism Over Order Conversion

What happened

A Motley Fool article highlights a 46% growth in GE Vernova's electrification backlog, attributing it to surging AI data center demand for gas turbines and grid equipment. DeepValue's report notes that recent backlog increases are driven heavily by slot reservation agreements rather than firm orders, raising conversion risks. At 44.7x P/E, the stock prices in flawless execution of capacity ramp and SRA conversion, but filings warn of potential idle capacity and margin pressure if demand falters. Cash flow strength relies on working capital inflows from down payments that may reverse as deliveries accelerate, limiting downside protection. Investors must await evidence of firm backlog growth and stable free cash flow in the next two quarters to confirm the bullish narrative.

Implication

The elevated valuation leaves no margin for error, requiring concrete proof that slot reservations turn into firm orders and the mid-2026 gas capacity expansion proceeds on schedule. Persistent Offshore Wind losses and the debt-funded Prolec acquisition add earnings volatility and integration risks without immediate returns. Critical monitoring points include next-quarter backlog composition and cash flow metrics to assess working capital normalization. Investors should heed DeepValue's WAIT rating, targeting a better entry near $650 if conversion risks de-risk, as the current price assumes perfect execution amid crowded sentiment.

Thesis delta

The Motley Fool article reinforces the AI-driven demand narrative but does not shift the core investment thesis, which remains hinged on unproven conversion of reservations to orders and high valuation risks. DeepValue's WAIT call is unchanged, as the key catalysts—firm backlog growth and capacity ramp verification—are still pending, with the article offering no new data to alter the cautious stance.