Bank of America revamps forecast for 'bridge-to-grid' AI stock

Core Viewpoint - U.S. stocks are experiencing volatility as investors question whether the AI boom is becoming a bubble, with the Nasdaq Composite declining approximately 2.4% over the past five days due to mixed earnings from companies like Oracle and Broadcom, raising concerns about the return on AI-related investments [1] Company Overview: GE Vernova - GE Vernova, a manufacturer of energy turbines and grid equipment, is perceived as an AI play due to the significant electricity demands of data centers, resulting in a stock decline of roughly 15% over the past five days despite some analysts maintaining a positive outlook [2] - The stock of GE Vernova has nearly doubled year-to-date as of December 18, indicating strong market interest [3] - Analysts highlight that AI is still in the build phase, with increasing power consumption from AI applications creating opportunities for companies in power generation and grid infrastructure [3] Financial Outlook - GE Vernova has raised its revenue guidance to $52 billion by 2028, up from a previous estimate of $45 billion, with adjusted EBITDA margins expected to expand from about 9% this year to 20% by 2028 [5] - The company has increased its backlog outlook to $200 billion from $135 billion, driven by rapid growth in its electrification business, and expects free cash flow to rise to $22 billion from $14 billion between 2025 and 2028 [6] - GE Vernova has doubled its dividend to $0.5 per share and increased its share repurchase authorization to $10 billion from $6 billion, reflecting confidence in its financial position [6] Market Positioning - The CEO of GE Vernova, Scott Strazik, emphasized the critical role of electric power in driving economic growth in the coming decades, asserting that the company is well-positioned with its extensive installed base and advanced solutions to serve this long-cycle market [7]