Wells Fargo says GE Vernova is a buy as AI energy demand grows

GE Vernova can help meet the massive energy demands from artificial intelligence, according to Wells Fargo. The firm initiated coverage of the energy company with an overweight rating. Its price target of $385 implies more than 12% upside from Wednesday's close. The company was spun off from General Electric earlier in 2024 , alongside other GE assets. Analyst Michael Blum said robust power demand tied to AI could lead to GE Vernova emerging as a key beneficiary, especially because the subsequent buildout will require an update to the power grid. Specifically, the analyst thinks gas will be the most in demand form of energy moving forward, which could translate to an 8% compounded annual growth rate for GE Vernova over the next eight years. GEV YTD mountain GE Vernova stock. "As power demand grows and more distributed generation is added to the mix, aging grids will require significant investment to manage the increasingly complex and dynamic environment," Blum said. "GEV's transformers, HVDC , and grid software offerings are well positioned to benefit from this growing demand." Blum expects power demand to grow at a 3% compound annual growth rate from 2024 to 2032. The analyst also noted GE Vernova trades at a discount relative to the S & P 500. The stock trades at a forward price-to-earnings multiple of 9.9, per FactSet, while the broad market index trades at 24 times forward earnings. "We project high levels of demand for its suite of generation and grid products, and believe the company has strong potential to accrete margin through price raises and lean manufacturing," Blum said.