Why GE Vernova (GEV) Is the Undervalued Powerhouse Behind the AI Revolution

The AI revolution is accelerating at an unprecedented pace, but its success hinges on a critical, often overlooked enabler: energy. As data centers consume more power than ever before—projected to double globally by 2030 and quintuple in the U.S. by 2035—the world is racing to build a grid capable of sustaining this digital transformation. Enter GE Vernova (GEV), a company uniquely positioned to solve the energy bottleneck through its nuclear innovations. While the market underestimates its role, GEV is not just a supplier of power—it is the architect of the infrastructure that will fuel the AI-driven future.

The Energy Bottleneck: Why Renewables and Fossil Fuels Fall Short

AI infrastructure demands uninterrupted, high-capacity, low-emission power. Traditional energy sources struggle to meet these requirements. Solar and wind, despite their green credentials, suffer from intermittency and require costly storage solutions. Natural gas, while reliable, emits 215–220 million tons of CO₂ annually by 2030 if used to meet data center demand. Nuclear energy, by contrast, offers a 92.5% capacity factor, outpacing renewables and gas, while producing negligible emissions.

Goldman Sachs estimates 85–90 gigawatts of new nuclear capacity will be needed by 2030 to power AI infrastructure. Yet, only 10% of this capacity is likely to materialize by then. This gap is where GE Vernova steps in.

GE Vernova's Nuclear Innovations: Bridging the Gap

GE Vernova's BWRX-300 small modular reactor (SMR) is a game-changer. Designed to deliver 300 megawatts of power—enough to power 200,000 homes or a single hyperscale data center—this reactor costs $2–4 billion, a fraction of traditional nuclear plants. Its passive safety systems eliminate the need for human intervention during emergencies, and its modular design allows for rapid deployment.

The company's strategic partnerships further solidify its market position. GE Vernova has joined the AI Infrastructure Partnership (AIP), a $100 billion initiative led by Microsoft and BlackRock, to develop AI-ready energy solutions. It has also secured a $2.7 billion U.S. government contract to expand domestic nuclear enrichment capabilities and is collaborating with Chevron and Engine No. 1 to supply gas-based power for data centers.

The Undervaluation Thesis: A DCF Model vs. Market Sentiment

Despite its pivotal role, GE Vernova's stock is trading at a 143x P/E ratio, far above the Electrical industry average of 30x. However, a discounted cash flow (DCF) analysis reveals a compelling story. Using a 2-Stage Free Cash Flow to Equity model, GE Vernova's intrinsic value is estimated at $647.57 per share as of August 2025, with the stock currently trading at a 6.4% discount to this figure.

The company's Free Cash Flow is projected to grow from $2.74 billion in 2025 to $14.56 billion by 2035, driven by its nuclear and gas power segments. Morningstar has raised its fair value estimate to $390 per share, while Zacks analysts project 64.7% earnings growth by 2027. These metrics suggest the market is underpricing GE Vernova's long-term potential.

Strategic Advantages: Why GEV Outpaces Competitors

GE Vernova's end-to-end capabilities set it apart. Unlike competitors like NuScale or Rolls-Royce, which focus solely on reactor design, GEV integrates grid solutions, AI-driven energy management (via its Alteia acquisition), and gas turbine technology. Its BWRX-300 SMR is already in the regulatory pipeline, with deployment expected by the early 2030s.

The company's diversified energy portfolio—spanning nuclear, gas, wind, and grid solutions—ensures resilience. For instance, its Haliade-X wind turbines and 7HA gas turbines provide complementary power sources, while its GridOS platform optimizes energy distribution for AI data centers. This diversification reduces risk and positions GEV to benefit from multiple energy transition trends.

Risks and Mitigations

GE Vernova is not without challenges. High upfront costs for nuclear projects, regulatory hurdles, and a limited supply of HALEU fuel remain concerns. However, the company is addressing these through government partnerships, modular reactor designs, and strategic acquisitions. Its debt-free balance sheet and strong backlog (55 gigawatts in gas power and electrification) provide financial flexibility to navigate these headwinds.

Investment Thesis: A Long-Term Play on the Energy-AI Nexus

For investors, GE Vernova represents a high-conviction opportunity at the intersection of AI and energy. While its current valuation appears elevated, the DCF model and growth projections justify a long-term hold. The company's role in powering the AI revolution—through nuclear, gas, and grid innovations—ensures its relevance for decades.

Conclusion: Powering the Future, Undervalued Today

GE Vernova is not just a supplier of energy—it is a critical enabler of the AI infrastructure revolution. As data centers demand more power, the company's nuclear and gas solutions will become indispensable. While the market underestimates its intrinsic value, the fundamentals tell a different story. For investors willing to look beyond short-term volatility, GEV offers a compelling opportunity to capitalize on the energy transition and the AI boom.

Investment Advice: Buy and hold for the long term, with a focus on the 2030–2035 horizon. Monitor regulatory developments and partnerships for catalysts.