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GE Vernova Rallies on the AI Grid Supercycle: Turbines, Transformers, and Cash Returns
Authored by Jeffrey Neal Johnson. Published: 2/11/2026.
Key Points
- The Power segment is experiencing a surge in orders as data centers require reliable baseload electricity to operate continuously.
- The recent acquisition of Prolec GE strengthens the Electrification segment by securing a critical supply chain for high-demand transformers.
- Management has raised the dividend and authorized share buybacks following a record year of free cash flow generation and backlog growth.
While the stock market has spent the past two years fixated on microchips and artificial intelligence (AI) software, a quiet revolution has been unfolding in the physical world. The massive data centers required to run AI models have an insatiable appetite for electricity, and the aging global power grid is struggling to keep up. That disconnect between digital ambition and physical reality has helped fuel a rally for GE Vernova (NYSE: GEV).
Following its spin-off from parent conglomerate General Electric in April 2024, GE Vernova has quickly established itself as a standalone industrial giant. As of mid-February 2026, the stock was trading near $800, marking an all-time high. Over the past 12 months, shares have surged approximately 107%, significantly outperforming legacy industrial peers.
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See the five stocks to avoid and learn what's driving this shift.Investors are waking up to a simple reality: the AI revolution stalls without the electricity to run it. By providing the machinery to generate power and the hardware to move it, GE Vernova has positioned itself as a sort of utility belt for the global energy transition. The company is no longer just an industrial spinoff; it has become a primary infrastructure play for the next decade of digital growth.
The Cash Engine: Fueling the Data Center Boom
The main driver of GE Vernova's valuation is its Power segment, specifically the gas turbine business. While the world moves toward renewable energy, intermittent sources like wind and solar cannot always provide 24/7 baseload power. Data centers run continuously, so utilities and independent power producers are increasingly turning to natural gas turbines to bridge that gap.
That urgent demand created a seller's market in late 2025. GE Vernova's recent financial results show how aggressive the buying spree has become:
- Order surge: In the fourth quarter of 2025, orders in the Power segment rose 77% organically.
- Backlog growth: The backlog for gas turbines and slot reservations jumped from 62 gigawatts (GW) to 83 GW in a single quarter. Management is targeting 100 GW by the end of 2026.
- Capacity expansion: The company is ramping manufacturing to produce roughly 20 GW of turbines annually by mid-2026.
Utilities are not just buying for tomorrow; they are booking manufacturing slots years in advance. On Feb. 3, 2026, the company signed a Strategic Alliance Agreement with Xcel Energy (NASDAQ: XEL). That deal secures hardware capacity through the 2030s, effectively locking in revenue for the next decade. A reservation agreement with Maxim Power (TSE: MXG) shows producers are willing to pay to hold a place in line. The company is also selling HE (High Efficiency) upgrades — such as the recent project at the Coryton Power Plant in the U.K. — which help existing plants generate more power with less fuel.
Plugging In: The $5.3 Billion Bet on Transformers
Generating electricity is only half the battle; it must also be transported to where it's needed. The Electrification segment, which focuses on grid solutions, has emerged as the company's fastest-growing unit. Revenue in this segment climbed 36% in the fourth quarter, driven by an urgent need to modernize aging grids to handle heavy loads from AI data centers and electric vehicles.
A major catalyst arrived on Feb. 2, 2026, when GE Vernova closed its acquisition of the remaining 50% stake in Prolec GE. The $5.3 billion transaction is significant for several reasons:
- Supply-chain control: It gives GE Vernova full control of a large manufacturing footprint for electrical transformers.
- Critical shortages: Transformers are currently the single biggest bottleneck in the electrical supply chain, with lead times stretching into years.
- Data-center focus: Prolec GE offers a dedicated product line for data center power, aligning closely with the AI demand narrative.
The company is also expanding margins by layering software on top of hardware. The launch of GridBeats, a software-defined automation suite, lets utilities manage substations more efficiently. That digital shift helps explain why margins in the Electrification segment expanded to 17.1% in the most recent quarter.
Profit Over Volume: Converting Headwinds into Dividends
While Power and Electrification are booming, the Wind segment remains a recovery story. The segment reported an EBITDA loss in 2025 of roughly $600 million, driven largely by offshore wind challenges, including regulatory delays at the Vineyard Wind project that resulted from a government stop-work order.
Investors have largely looked past these losses because management is exercising strict financial discipline. Instead of chasing unprofitable growth, GE Vernova is intentionally trimming its onshore wind backlog to focus only on profitable deals. That profit-over-volume strategy is beginning to show results:
- Repowering wins: In 2025, the company secured 1.1 GW of repowering orders in the U.S. onshore market.
- The logic: Repowering upgrades existing turbines with newer nacelles and drivetrains while keeping towers in place — a faster, more profitable approach than building new farms from scratch.
Because the gas and grid businesses are generating substantial cash, the wind struggles have not crippled the company's finances. GE Vernova produced $3.7 billion in free cash flow in 2025, more than double the prior year. That cash enabled two shareholder-friendly moves by the Board of Directors:
- Dividend hike: Doubled the quarterly dividend to $0.50 per share, annualized to $2.00.
- Buybacks: Increased the share repurchase authorization to $10 billion.
Those actions signal management's confidence that cash flow will remain robust, even if the wind business experiences short-term volatility.
Pricing the Supercycle: Is the Premium Worth It?
GE Vernova is trading at a premium valuation of roughly 45 times trailing earnings. While that multiple is high for a traditional industrial, the market is pricing in exceptional visibility provided by a record $150 billion backlog. That backlog effectively locks in revenue growth for years, insulating the company from short-term economic swings.
The AI trade has evolved. Phase one centered on semiconductors and chips (like NVIDIA (NASDAQ: NVDA)); phase two is the infrastructure required to run them. With the Prolec GE integration and a strong position in gas power, GE Vernova has staked out leadership in that second phase. Risks remain — notably offshore wind execution — but accelerating demand for electricity suggests the company's momentum is driven by fundamental necessity rather than speculative hype.
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