The good times may 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.
Analysts at the firm warned in a research note 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.
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. Analysts argued that the power-equipment maker's "substantial" backlog, recurring services revenue, and relatively limited direct exposure to data centers could help shield it from a downturn.
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," according to the analysts, who pointed to the company's multiyear backlog and Wall Street's comparatively modest sales growth expectations.
GE Vernova's balance sheet offers another advantage. The company is the only one of the 11 AI-exposed industrial companies examined by J.P. Morgan with more cash than debt, potentially giving it greater flexibility if demand weakens.
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 J.P. Morgan's 2030 downturn scenario.
J.P. Morgan maintained its Overweight rating on GE Vernova, but lowered its December 2027 price target to $1,000 from $1,035. That implies 26% upside from the stock's closing price of $797.04 on Tuesday.
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.