The off-grid energy project is getting a big proof of concept. What does it mean for GE Vernova
AI data centers powered by off-grid power plants took a big step forward this week, which bodes well for GE Vernova as industry challenges pile up. Monday’s announcement from Chevron that Microsoft has signed a long-term power purchase agreement to advance a major data center project could not have come at a better time. Microsoft will use power from a planned Chevron power plant in West Texas, and will be powered by large natural gas turbines from the Club’s GE Vernova brand. These turbines, which are large engines, are a great option for creating so-called back-of-the-meter power, which prevents stress on local power grids. The push to build data centers across the country to meet the massive demand for AI work has not been met everywhere with open arms. Wells Fargo emphasized political resistance as a pillar of the bear’s case against GE Vernova. Analysts also cited increased competition for turbines from rivals such as Mitsubishi and a decline in artificial intelligence trading, reflected in Tuesday’s sharp slide in the tech-heavy Nasdaq. Shares of GE Vernova, still up 60% year to date, are down more than 7% on the day. “The bears are going strong,” Wells Fargo wrote in a Tuesday note to clients. Analysts qualified that their fundamental case for GE Vernova remains positive. “We expect that GEV will continue to ‘work’ as long as the company continues to ‘hit and raise’ momentum,” they said. Wells Fargo also maintained an equal buy rating and a $1,259-per-share price target, which is about a 20% rise from Tuesday’s late levels. Analysts also pointed to the large market share GE Vernova’s assets have in the energy markets. They estimate that the company, which makes steam and gas engines, hydroelectric generators, and nuclear reactors, produces about 25% of the world’s electricity. That market share has protected GE Vernova’s large backlog — basically a waiting list of customer orders where every additional turbine can translate into future revenue. Wells Fargo expects prices for heavy equipment to trend higher as big tech firms jockey for place in the queue. In fact, analysts noted that the company “has not found a ceiling on the price.” Inside Project Kilby The Chevron power plant – which will be built in Reeves County and will power Microsoft’s planned data center – has been named Project Kilby. This facility is expected to deliver an estimated 2.7 gigawatts of power. That is equivalent to the power needed for 2 million homes. Chevron will supply the natural gas, while GE Vernova will supply the majority of the large turbines to support the facility. Not surprising, as the two have been partners in the project since it was announced in January 2025. Caterpillar is expected to supply the remainder of the turbines. Most importantly, the plant will be located next to a data center operated by Microsoft and will not terminate in the public grid. Jeff Gustavson, president of the Chevron New Energies division, told CNBC in an interview on Monday, “There’s really no competition for domestic consumers.” He added that “over time, as we have excess capacity, we plan to push that into the grid to help stabilize it.” Gustavson said there are dozens of these types of projects announced across the country, but few are as far-fetched as Project Kilby. He said that Project Kilby has the support of the public, where Chevron has a long history, and he said that they see a benefit in the local economy that will bring new job opportunities. Multiyear backlog Project Kilby will not happen overnight: Microsoft’s data center is not expected to start receiving industrial power until 2028. That timeline highlights the broader supply cuts facing the industry. A GE Vernova spokesperson told CNBC that Project Kilby engines are currently included in the company’s backlog, which reached $163 billion at the end of March. The company expects that number to reach $200 billion by the end of 2027, a year earlier than previously expected. The backlog continues to grow because GE Vernova is selling heavy-duty turbines until at least 2028, with less capacity between 2029 and 2030. Bernstein analyst Sunaina Ocalan called Project Kilby “just one more proof point of the huge demand for power we’re seeing” in the AI boom. “Higher demand is driving better pricing power for GE Vernova which translates into margin expansion,” added Ocalan. Big question for investors: Are there any big projects like this coming? “As we often see with these hyperscalers [like Microsoft]someone announces a deal, then you tend to get more down the road,” opined Jeff Marks, Club’s director of portfolio analysis. Jeff pointed to Club’s name Corning as an example of the domino effect. Corning announced in January a $6 billion supply agreement with Meta Platforms for fiber optic cables to be used by Facebook and Instagram and the company’s data center Corning in May and one Corning in May. In June. All those giants tech giants are Club Holdings There’s no doubt that bringing Microsoft on board is a big win not only for Chevron but also for GE Vernova, which boosts GE Vernova’s sales potential because of Tuesday’s big selloff, which brought down GE Vernova and Club chipmakers Nvidia and Arm as well as the broader tech sector. (See here for a full list of stocks from Jim Cramer’s Charitable Trust, including GEV, MSFT, GLW, META, NVDA, AMZN, ARM.) As a CNBC Investing Club subscriber with Jim Cramer, you will receive a trade alert before Jim makes a trade 45 minutes before Jim waits for a stock to be bought or sold in his trading portfolio. 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