The world's largest tech giants are clamoring for more power, electricity, that is. We've heard Elon Musk talk about how there could be shortages in the near future.
My guess is people's going to start hitting challenges with power generation maybe middle of next year, end of next year.
Sam Altman and Jeff Bezos have been pointing to outer space.
We're going to start building these giant gigawatt data centers in space. I would love to go build the Dyson sphere around the solar system and make the world's gigantic data center with the entire energy output of the sun.
How does it feel to be one of the few people on earth who might be able to help these guys?
It's not just for the hyperscalers and the tech companies. It's really for the world at large. Now this is going to be a much more growth-oriented next decade than the prior few decades. But we know how to build things at scale and a lot of the technology exists. So, I like our chances.
Sounds electric. This week on Bold Names, Scott Strazik. He's the CEO of energy company GE Vernova. And hot damn, what a wild ride it's been for this GE lifer. He had a stint as head of GE's energy business. Then in 2024, when Vernova split from the rest of the company, he was tapped to lead that. Since then, the company has become a stock market darling. That's because of the huge demand for energy in large part because of all the electrical needs from those tech leaders and their artificial intelligence ambitions, those hyperscalers. The big question of course, will this boom go bust? We get into that with Scott and much more in this very electrifying conversation.
Scott, we're so glad you could join us today. I think most people are familiar with what General Electric is, but maybe not as familiar with what GE Vernova is. Could you break down your business for us? What do you do?
You bet. I mean, GE Vernova was born on April 2nd of 2024 as an offshoot or spin-off of General Electric, a company that has over 130 years of history. And that represents all of what was General Electric's energy businesses. We produce more than half of the electrons in the US every day with our equipment through our customers. And that's across technologies, gas power, nuclear power, wind. We play a critical role with the grid. So it's really about applying the right technologies where the right resources exist. And that's really what GE Vernova is focused on doing every day.
I mean, you're really manufacturing at scale the energy industry products, right? Gas turbines in particular are important. Why are they so important right now?
Well, power density matters. How much energy or electricity can you create with the least amount of space? Gas is a very power dense solution in that regard, which is very important. You also just are getting into a world where the load dynamics with things like hyperscalers are very extreme. And what I mean by that is the megawatts going up and down can happen quickly. The reality is gas turbines are very capable of ramping up and down very fast to follow the load and that's why it's so well suited for this moment.
So I like that you jump straight to AI. Certainly one of my favorite topics. Hyperscalers. That sounds like something out of space.
I fall asleep every night with that on my lips, Tim. So these hyperscalers, is this the reason that your stock has been on a tear since 2024 and the split from your parent company or is it bigger than that? I mean, you're up like 300%, right? I mean, geez.
It's a contributor, but it's by no means the only factor. I mean, if you take a step back, the world is only getting today about 20% of its energy from electric power. The other 80% today is still coming from molecules, fuels, coal, and industrial applications. And it's very hard to find someone that doesn't believe the electric power as a proportion of the total energy mix isn't going to double over the next, let's say, 25 years.
So you mean especially as EVs replace gasoline for transportation and industry electrifies, that kind of thing?
As industries electrify, EVs is a very common one. I mean heat pumps are becoming more and more prevalent in new homes that are getting built. So all of these dynamics are going to lead to a world where both industries and products electrify and as they do that's going to drive a greater need for our products. So hyperscalers are part of it but it's by no means the only factor.
So we got EVs or electric cars out there. AI models need a lot of compute which requires a lot of electricity. We've got heat pumps. Just demand for electricity is huge. But I think I once heard you talk about how this moment almost rivals the post World War II buildout. What exactly did you mean by that?
Well, if you look in the US from 1945 to 1975, every 10 years the capacity for the electric power system doubled every 10 years. And then we got to 1975 and it continued to grow but at a much slower pace. So it took almost 35 years from 1975 to double again. And then in reality what happened from the early 2000s until directionally now is demand was flat. And demand was flat in the US for a lot of reasons. It was flat because jobs were leaving the country manufacturing demand. It was flat because of energy efficiency with things like our refrigerators and microwaves. It was also flat because technology with things like software and the internet drove productivity that hampered the need for more electrons. And the inflection point we're at now is those same drivers that were leading to a very flattish demand environment now need more electrons because what's happening: more industries coming back to the US, whether it be chip factories, whether it be data centers, that requires electrons. We also have things when it comes to the internet and software, well all of a sudden AI, the next productivity driver, needs even more electrons and it's a net add. So, we're really getting into a phase that I'm not going to say the total US power system is going to double in a decade like it did from 45 to 75. But the clear drivers of growth are substantial and are going to be substantial for a long period of time. And with it, it takes us back towards a period like 1945 where we've got to build things at scale.
So what steps are you taking to prepare for this potential explosion in demand for electricity?
Investing every day. I mean, we've talked this year about investing 7 to 800 million in our existing factories in the US. We're adding over 1,800 workers, primarily production workers, into our factories to balance today's products, making more of them. But we're also investing in new products for tomorrow. So our research and development budget this year is going to grow almost 25%. Our real objective every day is to balance expanding our existing capacity more with the products we know how to make today and we're doing that while also keeping our eye on the next decade when we're going to need some new technologies to continue to meet this moment.
And sorry, what's your R&D budget now? You said it's going to go up 25% but what's the baseline?
1.2 to $1.3 billion annually, growing at 20 to 25%.
I mean, we're in a bit of an unusual moment in history because typically when people are trying to project demand for something like electricity it's very hard to make that prediction but we know that for instance Sam Altman at OpenAI has said that they're going to spend more than a trillion dollars on new infrastructure over the next few years. So it doesn't take much time with a napkin to calculate what that's going to translate in terms of gigawatts of fresh electricity supply realistically. Is your company or you in combination with your competitors equipped to build enough capacity to address this explosion in demand over the next 5 years?
Yes, I think we can meet this moment. And I think the way to caveat it though is it's not going to be solved in 5 years. It's not just about the equipment. It's about having the EPC or the engineering procurement and construction companies to build the plants. It's about getting the gas pipelines available. It's about working through the permitting and land constraints and some of the dynamics in the country with different communities either wanting or not these investments in their community. What's clear is the direction of travel is going to include a substantial amount of investment into this space, but I wouldn't narrow it down to 5 years. I think we're really looking out the next 10 to 15 years and can we meet that moment? GE Vernova and the industry at large. I'm highly confident we can.
Your gas turbines are sold out through I think 2028. So how is this not a manufacturing bottleneck?
Well, what we say every day is we'll make the gas turbines as fast as the pedestals are ready for the gas turbines to arrive. And that goes back to that dynamic before. It's not just about manufacturing the gas turbines. Now, if incremental gas turbines are needed by 2028, because you're right, we're largely sold out between now and 2028. We'll work to solve that dynamic. What we see today is an environment where through 28 we likely are meeting the moment. But we also acknowledge that as the orders continue to come in as strong as they are and as the demand continues to rise, we may need to add incremental capacity to meet it. But based on everything we see today, that incremental capacity would come later than 2028.
Yeah. More broadly, just beyond your business, there are real signs here in the US that we face an energy crisis. The administration says a new executive order is aimed at improving manufacturing, transportation, agriculture, and defense industries. That is why today I will also declare a national energy emergency. We will drill, baby drill. I know our colleagues here at the journal have reported on just the sheer backlog of energy projects and the fact that our national grid is basically running out of room in some locations. For example, data centers won't be able to plug into the power grid until the 2030s. Kind of big picture thinking, how does the US overcome this challenge?
Well, I think in the next 5 to 7 years, a lot of those data centers may get built with the power attached to the data center.
And that's good for you, right? Because you're selling into a different customer. Clearly an opportunity for us.
