AI ignites electricity demand in the United States, gas turbines become the "key bottleneck," the "three giants" GE Vernova, Siemens Energy, and Mitsubishi Heavy Industries face a choice

The "electricity shortage" in the United States triggered by artificial intelligence (AI) data centers is pushing a traditional heavy industrial equipment—heavy gas turbines—into the spotlight of the technological revolution.

The fervent market demand is ushering in a golden era for the three industry oligarchs: GE Vernova, Siemens Energy, and Mitsubishi Heavy Industries, with orders and prices soaring.

However, in the face of this "windfall," the three giants have not chosen to fully expand production.

The reason lies in the lingering "ghost" of the industry collapse caused by the bursting of the internet bubble 20 years ago. Therefore, under the pull of historical lessons and current interests, they have collectively opted for a cautious response of limited expansion.

1. From "Computing Power Competition" to "Electricity Competition": Demand Explosion and Policy Boost

The essence of the AI competition is a competition for computing power, and the foundation of computing power is a stable and massive electricity supply.

For this reason, the demand for electricity to power AI data centers is skyrocketing at an unprecedented rate. Against this backdrop, gas turbines, with their efficiency, flexibility, and lower pollution compared to coal, have replaced coal-fired units to become the "main force" supporting the U.S. power grid.

The market's reaction has been direct and severe. According to research firm Oxcap, since mid-2023, the cost of newly built gas power plants has roughly doubled, primarily driven by the rising prices of gas turbines. Utility companies and tech giants have locked in orders to ensure future energy security, extending into the late 2020s. In addition to AI, the recovery of U.S. manufacturing, the proliferation of electric vehicles, and the electrification transformation in other sectors are also continuously driving up overall electricity demand.

At the same time, U.S. energy policies have provided a "tailwind" for natural gas power generation. The Trump administration was eager to provide sufficient electricity for server clusters and factories, viewing gas turbines as a key transitional solution to bear the load before the new generation of nuclear power plants is completed. Its gradual cancellation of clean energy subsidies has also impacted the supply expectations for renewable energy.

Media analysis indicates that after the passage of the "One Big Beautiful Bill Act," the forecast for new capacity in U.S. wind, solar, and battery energy over the next five years was downgraded by 23%, further exacerbating the market's reliance on natural gas power generation.

2. Learning from History: The "Ghost" of the 2000 Internet Bubble

Despite the market's enthusiasm, the three major gas turbine manufacturers are unusually cautious about expansion. This caution stems from a profound understanding of the cyclical fluctuations in the industry and the painful memories of the industry disaster in the early 2000s.

"This is a cyclical industry, and it will remain cyclical in the future," said Christian Bruch, CEO of Siemens Energy, candidly, "There will always be a day when the demand for gas turbines declines."

Learning from history, in the early 2000s, the market made overly optimistic predictions about the electricity demand for the internet, triggering a debt-driven construction frenzy of gas power plants. Ultimately, with the bursting of the internet bubble, power giants like Calpine declared bankruptcy, and gas turbine manufacturers found themselves mired in severe overcapacity Bill Newsom, CEO of Mitsubishi Power Americas, admitted that the huge challenge facing the company internally is "how to distinguish which demands are real and which are not."

Ryan Luther, Director of Energy Transition Research at energy data company Enverus, pointed out the current market's dilemma:

"If no one increases production, prices can remain high. But as soon as one major player significantly increases production, it could lead to a collapse in prices across the entire market."

III. Limited Expansion

After weighing historical lessons against current interests, the three giants have chosen to "seek stability" and opt for limited capacity expansion.

• GE Vernova has announced plans to invest over $300 million, aiming to increase its annual delivery capacity of heavy gas turbines from an average of 55 units in recent years to 80 units.

• Siemens Energy plans to increase capacity by 30% to 40%, while clearly stating it will avoid making high-risk bets on the market outlook for the 2030s.

• Mitsubishi Heavy Industries is expected to invest hundreds of millions of dollars to expand its production scale in the United States.

Artem Abramov, Deputy Head of Analysis at energy consulting firm Rystad Energy, believes that these expansion plans are "far from commensurate" with the growth in demand over the past two years:

"The expansion plans show that the giants are unwilling to overcommit."

It is worth mentioning that the bottleneck has now spread from assembly plants to upstream.

The supply of key materials, such as special alloys that form the core of gas turbines, is very tight. Kimberly Fields, CEO of advanced alloy manufacturer ATI, revealed that last year a major gas turbine manufacturer agreed to co-invest with ATI to expand its factory to avoid material shortages. She stated that for these giants:

"The current risk is whether they can obtain materials, while the price issue has become secondary."