In the heart of the American rust belt, a group of factory workers at GEs former power division is placing their hopes on a resurgence driven by the burgeoning AI revolution. They believe that despite the challenges posed by the global trade war and the tumultuous supply chain issues stemming from former President Donald Trumps policies, the revival of their industry is on the horizon.

GE Vernova, which was established just a year ago following the breakup of General Electric (GE), is making significant investments aimed at expanding its operations. The company is directing nearly $600 million into its former headquarters located in Schenectady, New York, as well as at various other sites. These investments are intended to produce equipment for gas-fired power plants and to contribute to the much-needed overhaul of the aging electricity grid in the United States.

This strategic direction aligns with the Trump administration's initiative to reshore manufacturing, thereby reducing the US's reliance on foreign supply chains, notably those connected to China. In addition, it reflects a broader pivot towards natural gas in an evolving economy where AI data centers are anticipated to require vast amounts of reliable electricity around the clock. The fossil fuels championed by Trump are viewed as necessary to meet this demand in contrast to renewable energy sources.

GE Vernova's share price has experienced a remarkable surge, tripling to a high of $438 in January 2024, following its spinoff in April 2024. This impressive growth comes on the heels of a tough period marked by persistent losses from its troubled wind energy sector.

The company currently employs approximately 4,500 workers and contractors at its Schenectady facility, which holds historical significance as the original site where GE was founded in 1892.

However, analysts are cautioning that the post-spinoff exuberance surrounding GE Vernovas stock is facing potential threats. Concerns have been raised about the efficiency gains achieved by China's DeepSeek AI model, leading investors to question whether the anticipated power demands will be as high as initially expected. In fact, GE Vernovas share price has seen a decline of 26% since reaching its peak on January 23, following Trump's announcement of his ambitious $500 billion Stargate project aimed at advancing AI technologies.

Brett Castelli, an equity analyst at Morningstar Research, expressed concerns, stating, If the AI hype cycle comes down to earth, the stock is going to feel pressure.

Adding to the uncertainties surrounding GE Vernova are Trumps critiques of renewable energy and the aggressive stance taken during his trade war, which could pose formidable challenges for the company's wind energy operations and supply chains.

After a prolonged period of stagnation, U.S. electricity consumption has surged to unprecedented levels and is projected to increase by an additional 16% by 2029, primarily driven by the expansion of AI data centers and the trend of onshoring manufacturing. This information comes from the think tank Grid Strategies.

Schenectady is currently a hub for the production of steam turbines, onshore wind turbines, gas turbines, and generators. The dynamics of the market have led to a remarkable transformation in GE Vernovas gas turbine segment, with orders for turbines doubling last year and the company boasting a full order book extending into 2028. Additionally, the electrification segment, which manufactures equipment for power grids, has seen a year-over-year increase in orders by nearly 20%. GE Vernova's CEO, Scott Strazik, described the current climate as one heading into an investment supercycle, reflecting optimism about the future.

Nonetheless, the outlook for demand is complicated by the unpredictable nature of AI. The Electric Power Research Institute has projected that data centers could account for anywhere between 4.6% to nearly 10% of U.S. electricity consumption by 2030. Meanwhile, the Department of Energy suggests that demand could triple by 2028.

GE Vernova is a play on the electrification of the economy and rising electricity demand, said Castelli, emphasizing that the variable with the most uncertainty remains the impact of AI.

The companys wind energy segment has encountered some turbulence in recent years. Two years ago, under the climate-focused Biden administration, GE Vernova had ambitions to develop Schenectady into a growth hub for renewable energy. However, this segment has faced significant challenges, including supply chain constraints, high interest rates, and a disastrous incident involving the collapse of an offshore wind blade last summer due to manufacturing errors.

Recent developments have compounded these issues; Trumps freeze on permitting along with efforts to dismantle the Inflation Reduction ActBiden's landmark climate law that extends subsidies for wind energy developershas cast a shadow over the entire offshore wind sector. Just last week, the administration canceled a substantial $5 billion offshore wind project that was already underway, further destabilizing the industry.

As a consequence, GE Vernova's orders for both onshore and offshore wind turbines nearly halved last year, prompting the company to halt any new offshore orders and downsize its operations in this sector. The moment of growth inflection is very hard to call, Strazik remarked in an interview, reflecting the uncertainty that looms over the industry.

Additionally, Trumps tariff war, which followed his liberation day announcement earlier this month, has contributed to an ongoing uncertainty in the supply chains of U.S. manufacturers. Despite these challenges, Strazik and other executives at GE Vernova remain optimistic about the future. They point to robust anticipated growth in power demand both within the U.S. and from AI data centers, alongside a continued global shift towards lower carbon energy solutions and their own investments in strengthening the U.S. supply chain.

This is where it helps to be a U.S.-based company, Strazik emphasized. Well continue to localize our businesses to the extent that the geopolitical supply chains are complicated.