AI data centers powered by off-grid power plants took a big step forward this week. This bodes well for GE Vernova amidst many challenges in the industry. Chevron’s Monday announcement that Microsoft has signed a long-term energy purchase agreement to move forward with a major new data center project could not have come at a better time. Microsoft will use energy from a planned Chevron power plant in West Texas, with most of its power provided by natural gas turbines under the club name GE Vernova. These turbines are essentially giant engines and are the best option for producing so-called behind-the-meter energy, preventing stress on local power grids. The drive to build data centers across the country to meet the huge demand for running AI workloads is not being met with open arms everywhere. Wells Fargo highlighted political resistance as a pillar of its bear case against GE Vernova. Analysts also cited increased competition for turbines from rivals such as Mitsubishi and a slowdown in artificial intelligence trading, as evidenced by Tuesday’s plunge in the tech-heavy Nasdaq. GE Vernova stock is up 60% since the beginning of the year, but is down more than 7% on the day. “The bears are getting louder,” Wells Fargo wrote in a Tuesday note to customers. Analysts believe the base case for GE Vernova remains positive. “We expect GEV to continue to ‘work’ as long as the company continues its ‘beat and raise’ momentum,” they said. Wells Fargo also maintained its buy-equivalent rating and price target of $1,259 per share, suggesting an upside of about 20% from Tuesday’s late trading levels. Analysts also pointed out the huge market share that GE Vernova’s equipment has in the energy market. They estimate that the company, which makes steam turbines, gas turbines, hydroelectric generators and nuclear reactors, generates about 25% of the world’s electricity. This market share has eliminated the huge backlog of GE Vernova orders. That is, a waiting list of customer orders where each additional turbine can lead to future revenue. Wells Fargo expects prices for large machines to trend upward as big tech companies compete for the same positions. In fact, analysts note that the company’s “price has not yet reached its ceiling.” Inside Project Kilby The Chevron power plant being built in Reeves County to power Microsoft’s planned data center is called Project Kilby. The facility is expected to provide approximately 2.7 gigawatts of capacity. This is equivalent to the electricity needed to power 2 million homes. Chevron will provide the natural gas and GE Bellnova will provide most of the large turbines to support the plant. This is not surprising, as both companies have been partners on this project since its announcement in January 2025. Caterpillar is expected to provide the remaining turbines. Importantly, the factory will be located next to a data center operated by Microsoft and will not be off the public power grid. “There’s really no competition for local electricity consumers,” Jeff Gustafson, president of Chevron New Energy, said in an interview with CNBC on Monday. “Over time, we will have surplus power, and the plan is to inject it into the grid to stabilize it,” he added. Gustafson said dozens of projects of this type have been announced across the country, but few are as advanced as Project Kilby. He said Project Kilby is supported by the local community, where Chevron has a long history, and he looks forward to the benefits the new jobs will bring to the local economy. A multi-year backlog project Kilby won’t happen overnight. Microsoft data centers are not expected to begin receiving power from power plants until 2028. This timeline highlights the widespread supply shortages facing the industry. A GE Vernova spokesperson told CNBC that the Project Kilby turbine is currently factored into the company’s order backlog, which totaled $163 billion at the end of March. The company expects this number to reach $200 billion by the end of 2027, a year earlier than previously expected. GE Vernova’s large turbines are sold out until at least 2028, and the backlog continues to grow as the company faces almost no production capacity between 2029 and 2030. Bernstein analyst Sunaina Ocalan said Project Kilby is “just another evidence of the huge demand for power that we’re seeing” amid the AI boom. Öcalan added: “The increased demand has increased GE Vernova’s pricing power, leading to margin expansion.” The big question for investors is: Will there be more large-scale projects like this? “When a company announces a deal, as we often see with these hyperscalers (like Microsoft), they tend to do more after that,” said Jeff Marks, the club’s director of portfolio analysis. Jeff cited fellow club name Corning as an example of the domino effect. Corning announced in January that it had signed a $6 billion supply agreement with Metaplatforms for fiber-optic cables used in Facebook and Instagram Inc.’s data centers. Corning signed a deal with Nvidia in May. Another one on Amazon in June. All of these tech giants are Club Holdings. Conclusion There is no doubt about this. Project Kilby, which brings Microsoft on board, is a huge win not only for Chevron but also for GE Vernova. Introducing hyperscalers to Texas power plant projects will likely increase sales in GE Vernova’s key power sector. It is the largest company in terms of sales and the main reason why we acquired the stock. We would be remiss if we didn’t further address Tuesday’s steep decline, which brought down GE Vernova as well as club chip makers Nvidia and Arm, as well as the broader tech sector. We’re not worried about the dip. GE Vernova’s fundamentals are good, and so are the fundamentals supporting the AI boom. GE Vernova’s incredible backlog and sustained demand for turbines and other electrification solutions is unparalleled. (For a complete list of Jim Cramer Charitable Trust stocks, including GEV, MSFT, GLW, META, NVDA, AMZN, and ARM, see here.) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, along with our disclaimer. No fiduciary duties or obligations exist or arise from your receipt of information provided in connection with the Investment Club. No specific results or benefits are guaranteed.
