AI power supply sector hit hard! "Gas turbine leader" GE Vernova CEO expresses concerns over "cooling power demand" in earnings call, stock price plunges in response.

A power demand feast ignited by AI is facing a cold front due to a bout of “cautious” remarks from an industry leader. As a core beneficiary of the AI power infrastructure boom, GE Vernova reported quarterly results that exceeded expectations on Wednesday, but CEO Strazik’s comments about capacity expansion during the conference call were not firm enough. He disclosed that capital expenditure for power and electrification businesses will peak next year, implying the growth cycle may be shorter than some investors anticipated. These remarks made the market nervous. Shares of GE Vernova plunged as much as 9% intraday, marking the biggest single-day drop in six months, ultimately closing down more than 1.5% with its market value evaporating in a day. The selloff quickly spread to the entire AI power concept sector, with shares of peers Vertiv Holdings Co. and Eaton Corp. dropping as much as 6.9% and 5.3%, respectively. “Given the market environment we’re in, every comment is being closely watched,” said Brett Castelli, equity analyst at Morningstar. He noted that some of Strazik’s comments “may have been interpreted as slightly cautious, as opposed to ‘everything’s up, no one can get enough capacity.'” The market’s sharp reaction highlights that, after significant share price increases, investors have become extremely sensitive to any signals that may suggest slowing growth, making expectation management key to steering share price trends in this sector. Two Key “Cautious Signals” from the Earnings Call Spur Selloff The trigger for this selloff was how investors interpreted Strazik’s remarks on the conference call. Against the backdrop of unprecedented AI-driven power demand and overwhelming company orders, the market had expected more aggressive and optimistic signals from management. Morningstar’s Castelli pointed out two statements from Strazik that unsettled investors. First, when asked whether production capacity would be expanded once orders reached a certain threshold, Strazik’s answer was not a resounding yes. Second, he expects capital expenditure for power and electrification to peak next year, signaling that the growth trajectory may be shorter than some observers anticipated. “Investors are searching for any comments that may indicate slowing or moderate growth,” Castelli said. In the current market, every remark is closely scrutinized. For a company whose stock is already up over 70% this year, any signals that do not fit the “everything is getting better” narrative are enough to trigger profit taking. Jefferies analysts noted in a report that for AI power concept stocks, “overcommitted demand, capacity price normalization, and policy reversals” remain bearish scenarios. Shining Earnings, But Hot Orders Can’t Match Surging Expectations GE Vernova’s Q3 results actually exceeded market expectations, thanks to a 55% year-on-year surge in power equipment orders. Specific data show that the company’s power business orders grew 50% year-on-year to $7.8 billion, while electrification business orders soared 102% to $5.1 billion. Its gas turbine backlog and bookings grew from 55 GW to 62 GW. Strazik himself said that gas turbine prices are “accelerating,” and the booking profit margins expected to be converted to orders over the next year are also improving. However, strong results failed to translate into upward stock momentum. The company maintained its 2025 guidance without raising it, disappointing investors who were hoping for more. Melius Research analyst Rob Wertheimer commented that the report had “nothing negative,” but for a stock that had doubled in the past year, “the expectation bar was set too high.” Strong Tech Giant Demand—Frequent Meetings With OpenAI CEO on Power Needs Although executive remarks sparked market concerns, real demand from tech giants remains strong. Strazik revealed in a media interview that he has had multiple meetings with OpenAI CEO Sam Altman in recent weeks, describing their relationship as “evolving,” with discussions focusing on OpenAI’s power needs, including power generation and electrical equipment. Reportedly, GE Vernova has quickly become the key power equipment supplier for nearly all major hyperscale data centers, including OpenAI, Oracle, Nvidia, Google, and XAI. Data show that year-to-date, orders from these tech giants for electrical equipment have reached $900 million, far exceeding 2024’s full-year $6 million. Strazik expects that, with Q4 orders, order volume from this customer group will “double in direction.” Strazik also confirmed that the company’s generation capacity is essentially sold out, with orders scheduled through 2028. In terms of order structure, the influence of tech giants is rapidly rising. Though roughly 90% of turbine orders currently come from traditional customers like utilities, among early-stage paid booking customers, tech giants now account for about one-third. Strazik said: “This starts to tell you where the market is heading.” Cautious Expansion Informed by Historical Lessons Strazik’s cautious tone is not groundless pessimism; it’s rooted in deep industry memories of past lessons. Wallstreetcn previously noted that industry leaders GE Vernova, Siemens Energy, and Mitsubishi Heavy Industries all share lingering anxieties from the disaster caused by the burst of the internet bubble twenty years ago. History shows that in the early 2000s, overly optimistic forecasts for power demand led to a frenzy of gas power plant construction, which, after the bubble burst, left manufacturers mired in severe overcapacity. Siemens Energy CEO Christian Bruch once stated: “This is a cyclical industry, and it will remain cyclical in the future.” Bill Newsom, CEO of Mitsubishi Power Americas, also admitted that the challenge for companies is “how to discern what demand is real and what is not.” Out of respect for industry cycles, the three giants have unanimously chosen cautious expansion to avoid repeating past mistakes, despite the windfall brought by AI. Risk Warning and Disclaimer The market is risky; investment should be cautious. This article does not constitute personal investment advice and does not take into account any specific user's investment objectives, financial situation, or needs. 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