AI's surge is sparking demand for an unexpected GE Vernova product
If you're excited about the growth of artificial intelligence, we have some electrifying news for you.
AI takes up a good chunk of the world’s energy — and it will be using even more in the coming years.
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The average ChatGPT query consumes nearly 10 times as much electricity to process as a Google search and Goldman Sachs Research estimated in a May study that data center power demand will grow 160% by 2030.
Currently data centers worldwide consume 1% to 2% of overall power, but this percentage will likely rise to 3% to 4% by the end of the decade, the firm said.
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"In the US and Europe, this increased demand will help drive the kind of electricity growth that hasn’t been seen in a generation," the Goldman study said.
Data center workloads nearly tripled between 2015 and 2019, but the demand for power remained relatively flat at about 200 terawatt-hours per year, Goldman said, as these facilities kept growing more efficient in how they used the power they drew.
But since 2020, the efficiency gains appear to have dwindled, and the power consumed by data centers has risen.
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GE Vernova 'adding gigawatts of nuclear energy'
"Some AI innovations will boost computing speed faster than they ramp up their electricity use, but the widening use of AI will still imply an increase in the technology’s consumption of power," the report said.
Nuclear energy is being suggested as a way to meet the tech power demand.
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Small modular reactors (SMRs) can generate up to roughly one-third the amount of power of a traditional reactor, and developers say they can be built faster and at lower cost than large power reactors.
On Oct. 16, the U.S. Department of Energy opened applications for up to $900 million in funding to support the deployment of small nuclear reactors.
“Revitalizing America’s nuclear sector is key to adding more carbon-free energy to the grid and meeting the needs of our growing economy—from AI and data centers to manufacturing and healthcare,” U.S. Energy Secretary Jennifer Granholm said in a statement.
Some of the biggest names in the tech sector, including Amazon (AMZN) , Alphabet's (GOOGL) Google, and Microsoft (MSFT) , have all recently announced agreements with nuclear energy companies.
Scott Strazik believes his company can play a role in the brave nuclear world.
Strazik is CEO of GE Vernova (GEV) , one of three companies spun off from General Electric, a list that also includes GE HealthCare and GE Aerospace.
GE Vernova, which started trading as a stand-alone company in April, focuses on electrification and carbonization.
"I do think in the early 2030s this will start to scale," CEO Scott Strazik told the Wall Street Journal last month. "We’re going to be adding gigawatts upon gigawatts of nuclear capacity every year. So it’s going to take this decade to really validate the technology, get a few of the first projects cut into COD, or commercial operation date."
"And I’m highly confident in the 2030s this is going to be a very material part of the equation for us," he added.
GE Vernova's nuclear business, GE Hitachi Nuclear Energy, signed a series of Memorandum of Understanding (MoUs) in September to support the delivery of its SMR technology in the United Kingdom.
Investment firms have been issuing research notes recently for GE Vernova.
Bank of America Securities said on Oct. 20 that, based on over 60 years of experience in nuclear power, GE Vernova has developed an SMR, the BWRX-300, that has won its first contract and has a pipeline of 28 units in various stages of regulatory approval, according to The Fly.
B of A, which said that it sees a "big opportunity in small reactors" for GE Vernova and called recent headlines about more nuclear investment "a positive" for the company.
Analyst: GE Vernova 'global leader in electric power'
The firm maintained its buy rating and $300 price target on the shares.
Deutsche Bank analyst Nicole DeBlase initiated coverage of GE Vernova with a buy rating and $354 price target.
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GE Vernova is a global leader in the electric power industry, providing products and services that generate, transfer, orchestrate, convert, and store electricity, the analyst said.
DeBlase said the company is a pure play on global investment in power generating capacity, and the outlook for power investment "is stronger than it has been in decades."
She projected a 63% adjusted EBITDA annual growth through 2027 for GE Vernova.
On Oct. 18, RBC Capital analyst Christopher Dendrinos raised the firm's price target on GE Vernova to $262 from $246 and kept an outperform rating on the shares as part of a broader research note previewing third quarter results in the U.S. Clean Energy sector.
The current dynamics — including the election cycle, elevated current but expected lower future interest rates, changing trade policies and competitive environments — have produced mixed results, and the investor sentiment “remains bearish” on the space, the analyst said.
Dendrinos also sees limited upside opportunity ahead of the November election and risk that is “largely to the downside” heading into earnings, amid limited cash generation, upside due to competition among solar installers and project delays for utility scale operators.
Offsetting the negatives, however could be the company's strong Power and Electrification performance and gas turbine orders that could be up significantly and will drive shares higher, Dendrinos said.
Not everyone is on board with small nuclear reactors.
A 2022 study by Stanford University and the University of British Columbia said that “small modular reactors, long touted as the future of nuclear energy, will actually generate more radioactive waste than conventional nuclear power plants.”
“Our results show that most small modular reactor designs will actually increase the volume of nuclear waste in need of management and disposal, by factors of 2 to 30 for the reactors in our case study,” said the study's lead author Lindsay Krall.
"“These findings stand in sharp contrast to the cost and waste reduction benefits that advocates have claimed for advanced nuclear technologies," she added.
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