GE Vernova’s gas turbines aren’t the only way it’s winning from the AI boom
GE Vernova’s rally has been fueled for more than a year by a single narrative: hyperscalers’ insatiable appetite for gas turbines to power data centers. But look beyond the headlines and you’ll see a lesser-known part of the company quickly emerging as a critical part of its AI fabric. GE Vernova’s electrification division, which produces the transformers, switchgear and grid software needed to connect data centers to the broader electrical grid, has quietly become the company’s fastest-growing business. In the first quarter of 2026, the segment received $2.4 billion in data center equipment orders, exceeding its fiscal 2025 total. “[It] “Everyone thinks of the company as a heavy-duty turbine business, but modernizing the grid to support an increasingly electrified world presents a significant opportunity,” said Jeff Marks, director of portfolio analysis at the Investment Club. Electrification accounted for approximately 32% of total revenue last quarter. Energy, which powers the popular gas turbines that power AI, is the company’s largest segment, driving more than 53% of revenue. Meanwhile, wind, wind This is the smallest number and accounts for about 15% of last quarter. However, electrification has grown from just $9 billion to $42 billion by the end of 2022. For comparison, GE Vernova reported a total backlog of $163 billion at the end of the March quarter, but expects that figure to reach $200 billion by the end of 2027. This growth is due to increased demand for electricity after nearly two decades of relatively flat growth. While modernizing an aging grid and restarting production plays a role, the most significant increase in energy demand is being driven by the AI boom. Consulting firm ICF predicts a nearly 39% increase in U.S. electricity demand by 2035 as a result. Alphabet, Amazon and Microsoft have aggressively increased capital spending to keep up with the heated AI arms race. Instead of building the infrastructure needed to move electricity from where it is produced to where it is consumed, there is tremendous demand from the electrification industry to connect faster than power plants can, GE Vernova electrification CEO told GE. Vernova further expanded its electrification business by purchasing the remaining stake in transformer manufacturer Prolec for $5 billion. Transformers serve as a vital connection to these data centers, triggering a massive wave of new orders for the segment. This is a huge opportunity for GE Vernova because electrical transformers are currently among the most sought-after pieces of equipment for large power transformers, stretched by unprecedented energy demand. Given that transformers are “one of the workhorses” of electrification solutions, the benefits of acquiring Prolec are a “very important move” for GE Vernova. Additionally, by directly owning Prolec, GE Vernova has full control over all its factories. Piron said Prolec’s load backlog has “increased” since the acquisition announcement. This isn’t the first time GE Vernova has adapted its business to gain favor with Wall Street. After years of the market underappreciating the business while it was part of General Electric, GE Vernova was spun off as an independent entity in April 2024. Since then, investors have treated industrial stocks as a pick-and-shovel AI play rather than a laggard conglomerate. Wall Street quickly realized that Big Tech players’ aggressive spending on data centers would benefit the power division. GE Vernova shares are up more than 694% since going public just over two years ago and are up nearly 70% in 2026 alone. “This could be a sell-off for the ages,” GE Vernova shares said after a bullish quarter in April, when power revenue peaked at 10% for the quarter due to a string of monster quarterly earnings gains and positive analyst calls as sales of this key power division continued to grow. CEO Scott Strazik said the current quarter also got off to a strong start: “As of the quarter, we received more power equipment orders by value compared to the first quarter of 2026,” he said. Barclays, Goldman Sachs, Jefferies, Baird, Guggenheim, TD Cowen, Oppenheimer and other firms increased their price targets for Club holding. Following up, Guggenheim noted the ruling’s “strong order growth” and said GE Vernova had the potential to return “much more capital to shareholders than the market is currently appreciating.” While turbines remain the biggest focus for most investors, “we’re definitely seeing more interest in electrification,” said Mizuho analyst Maheep Mandloi. Turbines are nearly exhausted by 2028. “There are revenue forecasts by 2030,” he said. “On the other hand, there is a potential rise of electrification [to the company’s guidance and estimates]The energy division received even more recognition last month. The stock rose nearly 2% on June 22 after investors learned that GE Vernova’s natural gas turbines would power a long-term power purchase agreement between Microsoft and Chevron. This is a boon for sales in the energy sector. Bernstein analyst Sunaina Öcalan called the announcement “just further evidence of the enormous energy demand we’re seeing amid the AI boom.” “Higher demand provides better pricing power for GE Vernova. These data centers will need even more power as AI adoption soars, Öcalan told CNBC. Good news for investors: GE Vernova is smartly positioning itself to capitalize on this trend. Beyond selling Prolec transformers for grid connection, the company is designing more advanced solutions to keep up with the evolving industry. Data centers operated by hyperscalers typically run 20 to 100 megawatts of power But as AI workloads become more energy-intensive and facilities are growing in size, some reaching capacity of 1 gigawatt or more, which could power about 750,000 to 1 million households, Meta announced in March that its El Paso data center will expand to 1 gigawatt, but Piron said GE Vernova is still “in the early stages” of the company’s plan to capitalize on that trend, but power stability and power delivery are a big push in the coming years. “He will see,” he added. “When you start expanding data centers beyond 1 gigawatt, you enter new territory where what was previously feasible is no longer feasible. That’s where we bring a solution.” A new solution? GE Vernova announced the release of GridOS for Transmission in early June. It is being used to help data center operators deliver more power over existing lines without waiting to build new physical infrastructure. Ultimately, GE Vernova’s energy business is the primary reason we are featured in the stock. But the electrification segment and its explosive growth is the icing on the cake. It is extremely encouraging to see yet another segment within the manufacturer developing. It really looks like GE Vernova’s order growth couldn’t be any stronger except for its wind division, which is by far the smallest in terms of revenue. The company’s huge savings and constant demand for both its turbines and electrification solutions also provide the company with approximately 25% of the world’s electricity. It has a buy-equivalent 1 rating and a $1,300 price target, implying more than 14% upside from Wednesday’s close (Jim Cramer’s Charitable Trust is long GEV, AMZN, MSFT, META, GOOGL. See here for a full list of stocks.) When you subscribe to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. 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