AI Spending Will Slow. GE Vernova Stock Can Rise Anyway. -- Barrons.com
Dow Jones2026/11/11 16:13By Ty Roush and Al Root
The good times might be nearing an end for companies supplying equipment to data centers, but GE Vernova could be better positioned than its peers to weather a potential slowdown in artificial-intelligence spending, according to J.P. Morgan.
Analyst Julian Mitchell warned Wednesday that the AI infrastructure spending boom may be entering its later stages, raising concerns about slowing equipment orders, excess manufacturing capacity, and pressure on profit margins.
"Over recent weeks, there have been some worrying signals regarding the longevity of the current very high capex growth rates among certain [industrial] datacenter customers," wrote Mitchell.
Oracle guided to peak capex in 2027 and 2028 and expects to spend less in 2029. And the Democratic midterm "Blue Wave" could result in construction delays.
J.P. Morgan forecasts about $1 trillion in total hyperscaler spending for 2026, growing to $1.8 trillion in 2027. In 2028, however, spending sharply decelerates to $2.2 trillion, up about 20%.
Slowing growth is a problem for industrial companies' earnings growth. Roughly 50% is driven by the AI data center boom.
J.P. Morgan still expects robust demand in 2027, forecasting data center-related sales growth of up to 60% for the companies it covers, but anticipates slower order growth next year and a more pronounced deceleration in revenue growth in 2028.
The cautious outlook prompted J.P. Morgan to lower price targets on several industrial stocks, including Trane Technologies, nVent Electric, and SPX Technologies. The analysts also initiated coverage of Eaton, Vertiv, and Johnson Controls with Neutral ratings, arguing their valuations leave investors vulnerable to a slowdown in spending.
GE Vernova is an exception. It has a "high degree of earnings visibility" given its substantial backlog. What's more, service revenue shields it from a spending downturn.
He rates shares Buy and has a $1,000 price target for shares. The average analyst price target for Vernova stock is almost $1,150, according to FactSet.
The downside risk to GE Vernova's earnings over the next couple of years is "far lower than for the rest of the AI names," added Mitchell.
GE Vernova's balance sheet offers another advantage. The company is the only one of the 11 AI-exposed industrial companies examined by JPMorgan with more cash than debt.
The stock's valuation also looks more appealing when accounting for a possible slowdown. While GE Vernova trades at a substantial premium to other AI-exposed companies based on 2027 earnings, that premium disappears under JPMorgan's 2030 downturn scenario.
Vernova trades for about 30 times estimated 2027 earnings. Industrial stocks in the S&P 500 trade for about 18 times.
Shares of GE Vernova rose 6% to $845 in premarket trading on Wednesday after ending Tuesday's session down 3.8%. The stock is down 28% from its 52-week closing high of $1,174.86 reached in June, according to Dow Jones Market Data.
Write to Ty Roush at tyler.roush@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
November 11, 2026 11:13 ET (16:13 GMT)
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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