GE Vernova CEO: AI is 20% of our backlog, nuclear SMRs coming by 2031-2032, commissioning 10GW for TSMC in Taiwan

it easy to get started. I think where this really gets interesting is how many more brands exist that we love, the consumers love because they're able to scale much much faster.

Well, thank you so much for taking the time to come chat with us. Congrats on the progress and looking forward to the next one.

We'll talk to you soon.

Goodbye.

Up next, we have the CEO of G Vernova, Scott Strazzik. uh AI data center electricity demand is expected to double or triple by 2035 and we have the perfect person to talk to about it. Nice to meet you. Thank you so much for coming on down.

Thanks for having me. I appreciate it.

Um I would love to start a little bit with your background because G Vernova is I mean we can go through a little bit of the history there but you've been with the company since before the creation of the company. You're older than the company you work for. the practical reality my adult life I was with GE and then ultimately G Vernova but I started with General Electric right out of college and I've uh lived through quite a few chapters some humbling some uh less humbling but

and this one is invigorating

it's a moment that we're going to take advantage of we see the purpose of what we're doing every day very clearly both in driving economic growth AI national security you know energy security is very much national security in a lot of the parts of the world right now

so we've got a real opportunity to serve And that's exactly what we're going to do.

So I I think most people will know uh you know natural gas turbine for data center but the business is bigger than that. Like zoom out for us and show and and walk us through you know what the shape of the business because you know massive workforce 85,000 people something like that.

You bet. 85,000.

Yeah. Remarkable. So walk me through the the the mechanics of the business and then we will double click on the AI story. Of course.

Sounds great. I mean you take a step back about a third of the world's electricity every day is created with our equipment through our customers. If you exclude China, so it's substantial. And even with China, it's 25%.

No pressure, by the way.

It's an obligation, it's a responsibility.

The Jamie Diamond of Energy,

uh, it's a big deal, right? So that's just keeping the lights on, notwithstanding what we need to do to then add the growth for where there is today. And that install base, that's gas turbines, that's nuclear power plants, that's wind turbines, it's a lot of the electrical equipment. That's actually our fastest growing business, okay, is everything associated with electrification and the grid and trying to make the grid more efficient and smarter because frankly in some ways you can make more progress there quicker than you can building new power plant.

Okay.

So all those variables are parts of the business and then in an economic opportunity where we need a little bit of everything.

Yeah.

And applying the right technologies where the right resources exist. Yeah.

To drive better economic answers and more resilient electrons. Yeah, it seems like it seems like the the the market or just the stories that I hear are that uh you're you're sold out. You have this massive backlog and it's more of the same. There's demand for more of the same, but it feels like you're also working on R&D. Talk to me about the the the trade-off versus just scaling what's already working, what's worked for years, I imagine, decades in many cases, versus uh a focus on research and development, the next technology.

So, the end product in some cases may look the same coming out of the factory. what we're producing or how we're producing it to scale and make more is changing drastically. So you think about gas turbines right now

we're adding a lot of production workers to build more gas turbines. We're also adding 400 machines this year

to automate a lot more in the process. Frankly, more of the innovation right now may be how do we scale okay

faster and in a more economic way so we can win the affordability game

while simultaneously investing for the future. Can you explain like I'm five some of those machines that you're buying? Some of your supply chain that people know 3D printers or CNC machines or different you know you just hammer it out yourself or whatever but I imagine it's very complicated. What does your supply chain look like?

We big castings big forgings that we get inside the factory then need to machine down to the right put the right material sciences the right coatings. When you think about a gas turbine, it's got to be very heat resistant because it's a fire that really is spinning inside that gas turbine to create the electrical power ultimately.

Yeah.

Uh on the demand side, I have been hearing about uh the the the absolute knockout dragout fight for energy. Yes. And in many cases, I don't know if it's relevant to you, but in many cases, we've heard about uh, you know, folks involved in the AI buildout putting in orders for more than they need and then sort of dialing it back because they know that certain things won't get permitted, certain things will get delayed. Does that happen to you? Are your customers coming to you and saying that they need twice what you think they need, and there's this like battle of back and forth?

I wouldn't say so. What I what I see happening more frequently is many of our customers are developing a number of projects. acknowledging that not all those sites are going to be chosen

and and and the actual supply is a little bit liquid and they can move it around. Got it.

And that's more what's happening. So sometimes we'll see press releases on leases canceled or sites that are that customers walk away from. That's typical development really. Sure.

What's really happening is our customers are buying at a realization rate knowing they're only going to ultimately develop a certain proportion of those sites. But we don't see any of our customers walking away from what they're securing today. Got it. Not at all.

Yeah, that makes sense. Um, what uh what what are your roadblocks? What roadblocks do you see to scaling either inside your business or at sort of the macro political level, appro permitting, approvals, regulatory, like what is on your short list of uh what America needs to do, what the industry needs to do to get right to actually continue to scale?

In some ways, what we do is a little bit easier. candidly because our equipment is built in a controlled factory. In fact,

sure.

The hardest part in some ways is actually building the plant itself, the construction. Yeah.

Because every plant in different parts of the country, different parts of the world, everyone's a little bit different.

And getting that craft labor

to those locations where a lot of the data centers and a lot of the electrification demand is is often very remote.

Yeah.

And that is going to take us some time. So for me, every gas turbine, wind turbine that I build, I'm using the same workforce every day. Yeah,

same people coming in Monday through Friday.

We can meet the moment from an equipment demand perspective,

but we need out in the field for those plants to be built

so they're ready for our pedestals when they come out of the factory.

Getting that orchestra right that the site is ready when our equipment is ready is going to be a challenge. And uh we're going to have to keep investing in craft labor

in these locations to do the build.

What does investing in craft labor look like? I mean, we've heard about res-killing, retraining trade schools. Is there a drought? Are people already seeing the news and seeing the stock price and retraining and reskilling, or is this uh more of like a decadel long process for America?

We've been successful so far. We've added about 1,800 production workers in the last 15 months. We'll keep growing that number from here.

You work to make the jobs more attractive. Part of how you do that is you take out the dull, dirty, unsafe work and that's where you automate.

Yep.

And then you allow these workers to thrive what doing what they want to do. But the reality is

they have a lot of pride in what they're doing every day. We put the customer name where the project is going with everything we build. So they understand the impact they're having. So it's not just a piece of electrical equipment. They know how they're

providing light and a middle class growth to Vietnam or economic expansion in the US and I think they see it as real and uh

have you considered engraving the signature of the technician on the engine like Mercedes does.

Exactly. But I think making personal matches.

Yeah. Yeah. That makes a lot of sense.

So there's a lot of pride.

What else is in the portfolio? I mean you mentioned wind. I I think nuclear you mentioned briefly like uh walk me through the the the scope of your ambitions in energy generation broadly for the business.

Yeah. But nuclear is important. We're building small modular reactors today. Think 300 megawatt machines that can be uh they're big but they're built inside the an American football field.

Yeah.

So that's 300,000 US homes that can be powered from one small modular reactor that is within a US football field.

Yeah. So that's very

300 megawatts and that still qualifies as small and modular. That's

relative to what used to be for nuclear, you know, and it used to be a gigawatt. Yeah. Like a big westing house development, multiple years precisely built on site massive concrete structures. Now we're trying to build a lot of them within this construct so that we can come down the cost curve because the reality is every nuclear plant historically was a snowflake and that's why the industry never really became economically competitive.

Yeah. No standardization

and we're fixing that. So that's important.

And what is the regulatory approval process for that? I mean I've heard that uh there's this famous line around like the uh NRC hasn't approved a new design in decades. Is that what you're feeling? Does it feel like there's a shift?

Yeah. I guess the question is like when like we're now about two years and a month since the spin out. Yes. Was was small modular reactors on the road map when the spinout

Yes.

occurred and then and then the opportunity has got more compelling from a regulatory standpoint since then.

Yeah. We're in construction on the first plant right now. It's in Canada um outside of Toronto. We will get NRC approval for the first plant in the US. I think this summer we'll be in construction and we've committed to the administration that as soon as we get the approval, we'll be ready to work on day one. And then from when we start construction, it's about a four-year cycle from the beginning to getting to commissioning. So, this can start to happen. And that's where the comparison of the large block, it's more of a 10-year construction cycle. That's a long time to wait. Yeah.

For new electrons. But even if you want 1.2 2 gawatt. The beauty of the small modular reactors is you can do them in blocks and every two years after you get the first one built add 300 megawatt

which also then meets a lot of our customer expectations to grow with the electrons

so this is going to be an important part of the equation for us.

Are those two completely separate divisions or is there some fluidity across the workforce

in the on the front end of the business? Commercially, there certainly is with customer relationships. Uh, but from a manufacturing and an engineering perspective, they're pretty distinctly different.

That makes sense.

Uh, what what has been surprising to you about where the sort of energy infrastructure buildout is at today relative to the AI boom versus what was predictable um, when the spinout first happened.

Certainly in the US, the demand has accelerated greatly in the last two years and one month. No question about it.

But weren't you seeing that? Didn't Didn't you feel like you had a

early stages? Early stages. What I'd say that has surprised us though is there was probably concern that as the US market started to take off, it would price out a lot of other markets in the world from even being capable of buying the equipment.

Interesting.

The reality is we still see a very strong demand signals from a lot of other markets in the world. I mean in the first quarter we had very strong demand in Vietnam, in Mexico, in Canada, in Saudi, in Kuwait.

So the global dynamic is still driving real growth above and beyond the AI dynamic.

Yeah.

The reality is AI specific. It's about 20% of our backlog today.

Yeah. Interesting. And and those international projects

uh I guess due to having third being a having 30% of the the global market, right? responsibility the scale is just already so immense that even if you have a massive acceleration via new technology cycle

and I think with a lot going on in the world today more countries just realize for just national security reasons they need a diverse portfolio of solutions to electrify and energize their country so and that really goes back to really the war in Ukraine and it's only been accentuated over the last 5 years

how have you processed uh some of the writing coming out of places like San Francisco, I'm thinking, you know, Leopold situational awareness where, uh, if you look back over the last couple years, he's been right over and over and over. Uh, at the time, a lot of people reading that, even in AI, seemed would think like, hey, this seems pretty aggressive. But, uh, to date, uh, he's been quite accurate. Even even some more sci-fi kind of exercises like AI 2027 have been relatively accurate. uh up until this point. Uh but how did you how did you process you know basically kind of the analysis coming out of the the AI community and SF going back a few years?

It's hard for me to kind of decipher how this is going to play out and who are going to be winners and losers and how that plays. But it's very hard when you take a step back in this country and really throughout the world to not believe we don't need a lot more infrastructure build for communities and economies to thrive.

So at the end of the day um we're deeply investing in these businesses to to meet this moment and we think we're pretty early in this journey and uh are going to keep investing into it.

Is sovereign AI driving any of the international demand that you mentioned? you start to see some of the hyperscalers evaluate more build out in Southeast Asia as an example. So they'll try to use exactly Malaysia, Indonesia,

natural gas but adjacent to Singapore for law.

Sure.

Um so in that regard that's happening certainly Taiwan's one of our biggest markets. That's because of TSMC.

Interesting.

So we are commissioning almost 10 gigawatts of power primarily for TSMC. So that's

not for data centers but for fabs

for the fabs for the chip.

I had no idea they were so electricity.

So significant demands in Taiwan for that adjacency.

So and that's happening in the US too as you think about some of the chip fab factories that are being built. So it's not just the AI factories,

it's the infrastructure around it that that needs the electron.

Okay. uh help me understand some of the less sexy or less obvious uh maybe pieces of the grid that need to be modernized, need to scale up. If we're familiar with the turbine, we're familiar with the nuclear reactor. These are very tractable things, but I'm sure there's so many other pieces of the electron delivery supply chain that are important and you're involved in. I mean if you just take a step back the system is really is built was built for a coal uh plant to in one direction flow electrons towards a house or a factory

and that was at a 24/7 flow very stable and then you still had peak demand during the day or

you did or during the summer. Exactly. So that was where we started. Now you have all these variable forms of uh generation. Yeah.

On top of that, you have electrons that are going in multiple directions because you have people selling their electrons back into the grid on their roof.

Yeah.

And the system is not optimizing all those electrons.

So, we have a old machine for all intents of purposes that is not doing a great job matching the supply with where the demand is.

Part of that is for boring reasons like we have islanded grids in the US. It's not one connected machine to project things to where it needs to be.

Is that possible given the geographic diversity and like how spread out the United States is? Could is it possible that I could sell electrons in California and it could wind up in New York?

Certainly in the 48 states for sure. I mean, there's no reason we shouldn't be able to build build a meshed grid that works. Um, today we don't have that. Um, no. I think in this regard, the federal government's pushing hard on

historical precedent. Yep.

To try to drive efficiency because that's a faster way to incremental electrons

in some way than simply building more plants.

We're working on that. Part of that is making new connections that bring islands together. Part of it is also, and this is frankly the harder part, different regulatory structures and market practices to allow different players to get paid. Yeah.

In that and that

is sometimes harder. Yeah.

But we're working our way through that.

Uh talk about uh nuclear timelines. We've seen a bunch of announcements from hyperscalers. It feels like 2030, 2032. You see 2035. Uh even stepping aside from your business just broadly uh I think a lot of us tracked Vodal that took decades. When do you think we'll be getting new electrons from a new nuclear plant in America?

You bet. I mean I I start with the fact that we've got about 56 existing uh plants in the US that can add 5 gawatt of power by upgrading what's already running. Okay.

That can happen this time and that counts. Yeah, that'll happen soon.

So that's the first step. Sure.

New incremental plants,

2032, 2031. That's about right.

Yep.

But then we can scale and in the next decade, this can become a much more meaningful part of the equation for the country and the world.

Okay. Yeah, that makes sense. Is that uh going to be deeply capex intensive at some point once that 2032 there's a rationalization or realization that it's working but we in order to 10x 100x the nuclear production there's going to be some sort of capex boom and a delay in the investment before it gets recouped and starts generating electricity.

Nuclear is definitely capex heavy but then it lasts forever. Yeah. So the you know life cycle cost of nuclear can be very compelling but there is a significant upfront cost.

Talk about some of the other initiatives that are happening broadly around electrification and just uh grid reliability. We've talked to companies that are doing uh home batteries to try and release some of the there's the Tesla Power Wall, there's base energy, there's a few other companies that are working in that space. Are there any other sort of nearterm between now and 2032 steps that you think America or the grid should be taking to just modernize and create more efficiency and more electrical abundance?

I do think in most applications you're going to continue to see storage grow in the system. We historically think about storage primarily with solar.

Yeah. The reality is storage is going to start to be attached to many power generation sources to create more optionality for us and that's a good thing and that attached with software can ensure that we get more of the electrons where it's needed.

Yeah. Uh you mentioned solar. What is the bullcase for an American solar dominant industry? It feels like China is very cost competitive. Yeah. Uh there's discussions of hey if they're cheap maybe we should just buy them all and install them. We have a friend who has that take. There's other folks who are more on the tariff and let's, you know, uh, put some barriers in place to give our indigenous industries a chance. Where do you fall on what it takes to roll out,

I guess, as much solar as we need?

Yeah, I'd say stationary equipment, solar panels or batteries. Uh, China's ahead by uh by by a lot. Mhm.

where they struggle still to a larger extent is with rotating equipment that requires another level of uh material sciences.

That means tracking the sun.

Uh well no outside of solar shifting in the comparison to

a turbine wind turbine although they're competitive there nuclear

it requires another level of heat resistant technology that um we still have quite a lead on.

That's great. But on the stationary equipment like a solar panel or storage, it's going to be tough.

Yeah.

The investments that have been made in those factories to automate and the capex required

that is a challenge. But the reality is the country has a lot more resources than China has.

Sure,

we have very inexpensive gas. We have a much more advanced nuclear industry here. We have plenty of land that has good wind and solar to take advantage of in a grid that we can do more with that already exists versus having to create it from scratch. So, we have a lot going for us, but in this regard, we do need to build in a different way going forward than the way we had the last 25 years. Albeit there wasn't a lot of electricity demand growth the prior 25 years.

Yeah. Yeah, that makes sense. uh lots of Silicon Valley companies today building in energy. How are you thinking about M&A over the long term? I think a lot of these teams are very talented.

Many of them will probably create interesting innovations, but a lot of them won't necessarily get to real scale and maybe be a standalone uh public company, let's say, but could be an interesting tuckin for a platform uh like GEV. How how are you thinking about M&A? Are you meeting these companies? Do you ever invest in them?

It's a big part of our future. I mean, we we try to lean into the ventures game more and more, but we want to be thought of as a partner that these companies come to.

Yeah.

Because we do know how to industrial industrialize things at scale. We have very strong relationships with the end customers. And part of why I appreciate opportunities to come and talk with you guys is that's the company we want to be seen as, as a partner of choice whenever they choose that. It doesn't have to be M&A and an acquisition. It can be an alliance in different ways because it's going to take many different partnerships in many different structures for us collectively as a country to meet the moment.

Verova also doesn't have all the answers. There's a lot of stuff we know how to do, but there's a lot in this ecosystem that we've got to get better at. Which is why to some extent one of the big pluses for us right now is as our customers have shifted more to Silicon Valley and it's about 20% of our backlog today. They're making us better because they think about innovation differently, risk and reward a little bit differently

and timelines maybe.

Timelines for sure. Timelines for sure. And I think that's good for everybody.

Totally. It's good. Yeah. Right. Right now there's there's uh you know maybe you know everyone's frustrated because they want it they want it now. uh but at the same time um yeah just just increasing that uh innovation cycle will be better for everyone in the long run. Did you feel like you went through a culture reset process during the spin out? What did you take from GE versus what did you what did you try to create build from the ground up? the fact that I had been there have been 25 years it's because I always like the ambition of the company and I always love the people at the same time we always didn't perform as well as we could have which really comes back to focus and the beauty of the spin out is it got us focused on one purpose every day

we weren't competing with a healthcare business or an aircraft engine business for capital board wasn't diversified to solve many problems we're here to lead in expanding the electric power system and ultimately decarbonizing the world in the process. And I think that focus as much as anything is also helping us attract another level of talent.

Totally.

Because I think a lot of young people see climate change as an example, one of their generation's biggest challenges and there's no confusion that Vernova can be a company that can move that needle at scale. So, it's helping us just perform better with focus. It's also helping us attract another level of talent and create our own culture while still protecting for the ambition and what was a great people culture, but we were a big company inside GE and sometimes too many goals or no goals at all.

I love that you're like I'm I'm It's so nice being at a small company now of 85,000.

I have I have two final quick questions. Uh one, I would love to know uh what a year in the life looks like for you. like where are you spending time? Where's headquarters? When are you on site? When are you with customers? Like are you flying around the world constantly? Like what's what's your dayto-day look like over the course of a year?

Yeah. I mean, our headquarters is in Cambridge, Mass in Boston. And we we put the headquarters there because we did want to attract those young people that believe climate change matters and to give them a platform to start their career. And in that regard, it's worked.

All that said, I'm not there much. you know, uh I've spent 10 weeks so far this year outside the US.

Wow.

That's a lot in May.

But the reality is um this is a unique moment. Yep.

There's a lot of complexity from a geopolitical perspective where governments are very engaged on

power generation buildout. So, you have to show up and uh have those adult conversations in person. Sure.

So, this year has been very heavy international travel.

Sure.

I'm on the West Coast multiple times a month. That's a given. Um admittedly more in Northern California and Seattle than LA, but um right now we need to be consistently co-creating with our customers. Yep.

Because they're learning every day what they really need. Yeah. And this has shifted from what it once was of buying a power purchase agreement and then just getting the electrons to asking us not just for an electron but to build an integrated system that allows them to run their end application the way that they want. And frankly, every customer has somewhat different strategies for what they want. If it's AI for what that AI factory needs to do,

we need to co-create with them if we're going to serve them. So, we're showing up and I need to show up.

And then last question, uh, it seems like a incredibly AGI proof company or beneficiary. There's a business is huge and diversified. What does it take to get a job at G Vernova today?

Humility,

intellectual interest, and uh, a real belief in the purpose. We are a company that's hiring a lot of people right now. Um, take our neighbors at MIT. We've got 69 kids starting with us in July.

You took the whole class.

69.

That's

because we need to complement those production workers with young engineers. Totally.

That get excited about building something

and that's one of the things we're excited about. I think sometimes we talk so much on the risks of job loss.

Totally.

Through AI, of course,

we're going to build a lot of cool stuff and be proud of it.

And uh that takes a combination of a lot of different types of people. And uh and we want him to be with Vernova.

That's amazing.

Do the hyperscaler CEOs whine and dine you?

No.

No.

There's that apocryphal story about uh what is it? Larry Ellison and Elon Musk begging Jensen for GPUs and it's hotly