The AI power supply sector has been severely impacted! The CEO of "gas turbine leader" GE Vernova expressed concerns about "cooling electricity demand" during a conference call, leading to a sharp decline in stock prices

A feast of electricity demand ignited by AI is encountering a cold wave due to a "cautious" remark from the industry leader.

As a core beneficiary of the AI power infrastructure boom, GE Vernova's quarterly results announced on Wednesday exceeded expectations, but CEO Strazik's statements regarding capacity expansion during the conference call were not decisive enough, and he revealed that capital expenditures in the power and electrification business will peak next year, suggesting that the growth cycle may be shorter than some investors expect.

This remark put the market on edge. GE Vernova's stock price plummeted by as much as 9% during intraday trading, marking the largest single-day drop in six months, and ultimately closed down more than 1.5%, evaporating market value in a single day. This wave of selling quickly spread to the entire AI power supply concept sector, with peers Vertiv Holdings Co. and Eaton Corp. seeing their stock prices drop by as much as 6.9% and 5.3%, respectively.

"Given the market environment we are in, every comment is being closely monitored," said Brett Castelli, a stock analyst at Morningstar. He pointed out that some of Strazik's comments "may be interpreted as slightly cautious rather than 'everything is going up and well, and no one can get enough capacity.'"

The market's intense reaction highlights that after a significant rise in stock prices, investors have become extremely sensitive to any signals that may indicate a slowdown in growth, and expectation management has become key in determining the price direction of the sector.

Two "Cautious Signals" from the Conference Call Triggered the Sell-off

The core trigger for this sell-off is investors' interpretation of Strazik's remarks during the call. Against the backdrop of unprecedented high AI power demand and the company being inundated with orders, the market had originally expected management to release more aggressive and optimistic signals.

Morningstar analyst Castelli pointed out that two of Strazik's statements made investors uneasy.

First, when asked whether production capacity would be expanded once orders reached a certain threshold, Strazik's response was not a definitive yes. Second, he anticipated that capital expenditures in the power and electrification business would peak next year, suggesting that the growth trajectory may be shorter than some observers expect.

Castelli stated, "Investors are looking for any comments that may indicate a slowdown or moderation in growth." In the current market environment, every comment is being closely monitored. For a company whose stock price has risen more than 70% this year, any signals that do not align with the "all is well" narrative are enough to trigger profit-taking by investors.

Jefferies analysts also pointed out in a report that for AI power supply concept stocks, scenarios such as "overcommitment to demand, normalization of capacity prices, and policy fluctuations" always exist

Strong Financial Report, But Booming Orders Can't Compete with High Expectations

GE Vernova's third-quarter financial report actually exceeded market expectations, thanks to a strong performance with power equipment orders soaring 55% year-on-year.

Specific data shows that the company's power business orders increased by 50% year-on-year to $7.8 billion, while electrification business orders surged 102% to $5.1 billion. Its gas turbine backlog and bookings also grew from 55 gigawatts to 62 gigawatts.

Strazik himself stated that gas turbine prices are "accelerating" upward, and the booking profit margins expected to convert into orders are also improving over the next year.

However, the strong performance has not translated into upward momentum for the stock price.

The company maintained its performance guidance for 2025 without an upward revision, which disappointed some investors hoping for higher expectations. Melius Research analyst Rob Wertheimer commented that there was "no negative news" in the report, but for a stock that has doubled in price over the past year, "the bar for expectations has been set too high."

Strong Demand from Tech Giants, Frequent Meetings with OpenAI CEO to Discuss Power Needs

Despite executive comments raising market concerns, the real demand from tech giants remains strong.

Strazik revealed in a media interview that he has had multiple discussions with OpenAI CEO Sam Altman over the past few weeks, and their relationship is "continuously evolving," focusing on OpenAI's power needs, including power generation and electrical equipment.

Reports indicate that GE Vernova has quickly become a key power equipment supplier for almost all major hyperscalers, including OpenAI, Oracle, NVIDIA, Google, and XAI.

Data shows that so far this year, electrical equipment orders from these tech giants have reached $900 million, surpassing the $600 million for the entire year of 2024. Strazik expects that, along with fourth-quarter orders, the order volume from this customer group will "double in direction."

Strazik also confirmed that the company's power generation capacity is essentially sold out, with orders booked through 2028. From the order structure, the influence of tech giants is rapidly increasing. Although currently about 90% of turbine orders come from traditional customers like utilities, tech giants account for about one-third of the paid reservation customers in the early development stage. Strazik stated, "This starts to tell you the direction of the market."

Cautious Expansion Based on Historical Lessons

Strazik's cautious statements are not unfounded pessimism; they reflect the heavy gas turbine industry's deep memory of historical lessons.

As previously mentioned by Wall Street Insights, the three industry giants—GE Vernova, Siemens Energy, and Mitsubishi Heavy Industries—are all haunted by the industry disaster triggered by the bursting of the internet bubble 20 years ago Historical background information shows that in the early 2000s, overly optimistic forecasts for electricity demand led to a construction frenzy of gas power plants, which ultimately resulted in a mess after the bubble burst, leaving manufacturers mired in severe overcapacity.

Siemens Energy CEO Christian Bruch candidly stated, "This is a cyclical industry, and it will remain cyclical in the future." Mitsubishi Power Americas CEO Bill Newsom also admitted that the challenge the company faces is "how to distinguish which demands are real and which are not."

It is precisely based on a respect for the industry's cycles that the three giants have chosen a cautiously limited expansion in the face of the "immense wealth" brought by this round of AI, in order to avoid repeating past mistakes.

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