By The massive demand for energy as Big Tech races to build its AI infrastructure has been a tailwind for GE Vernova (GEV), the power equipment maker that spun out of iconic GE earlier this year.
Shares of the Cambridge, Mass.-based company have been hovering near all-time highs, along with the broader S&P 500 Industrial ETF (XLI), as investors look to play off the electrification and artificial intelligence theme led by AI chip heavyweight Nvidia (NVDA).
“[Vernova] seems to be caught up in the broader trade of AI and power demand,” Daniel Rich, analyst at CFRA, told Yahoo Finance. The firm has a Buy rating and a price target of $230 on the stock.
Much of Wall Street’s bullishness stems from expectations of power demand growth stemming from Big Tech’s commitment to record infrastructure technology investments.
Amazon (AMZN), Alphabet (GOOGL), Microsoft (MSFT), and Meta (META) are expected to spend a combined $200 billion this year on cloud and AI investments, including building and maintaining data centers.
Vernova stock is up more than 100% since its spinoff, compared to the S&P 500’s (^GSPC) 21% year-to-date gain. That’s despite negative headlines in the company’s most challenged unit — its wind turbines — after incidents of blades breaking off in key offshore projects.
Molchanov from Raymond James cautions the strong run-up means there could be little room to run, though.
“It’s an S&P 500 stock that has doubled in the last six months. If that sounds a little bit like certain other AI-related companies that people are familiar with, well, that’s not a coincidence,” said Molchanov.
Calling the AI-fueled rally “overstretched,” the analyst and his team downgraded the stock from Outperform to Market Perform based on valuation. Much of the enthusiasm over AI is already baked into Vernova’s share price, he said.
“The bottom line is that we think the stock could use a period of consolidation after its sentiment-driven gains, and we look forward to revisiting our rating if and when the trade becomes less crowded,” he said.
The stock has 19 Buy, six Hold, and two Sell analyst recommendations.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.
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