Morgan Stanley raises its 2030 gas turbine/power solutions supply forecast while remaining positive on Siemens Energy and warning on behind-the-meter market oversupply

Overview

This report is Morgan Stanley's weekly update on European capital goods, focusing on gas turbines, engines, and data center power solutions supply and demand. Following GE Vernova's added capacity, ERock's inclusion in the model, and Cummins' additional 1GW of capacity, the report raises its 2030 gas turbine and main power solutions supply forecast from 135GW to 146GW. The core of the analysis is not whether orders peak in 2026, but how looser supply-demand conditions after 2030 could pressure growth in gas new equipment, grid businesses, and group EBITA.

Core views

The report argues that higher supply does not translate evenly into the same investment risk. Supply of medium and large utility-scale gas turbines is about 82GW by 2030, above long-term historical demand, but amid a new power demand paradigm, coal/oil-to-gas switching, and migration of data center bridge power toward larger gas turbines, the conclusion of oversupply is not clear-cut. Risk is more concentrated in the roughly 64GW of behind-the-meter power solutions, including small gas turbines, reciprocating engines, and fuel cells, because this supply must match the pace of U.S. data center construction, while the report sees uncertainty around continued strong demand expansion beyond 2030 due to permitting, labor, and cost constraints. At the stock level, Siemens Energy remains attractive because it needs less incremental capacity, order pricing is improving, gas service margins could exceed current expectations, and its 2028 EV/EBITA valuation trades at about a 50% discount to GEV; although Wartsila disclosed that energy new equipment backlog margins have improved by 500bps since early 2025, the report still sees limited 2028 profitability and relative upside.

Analysis framework

The report uses a multi-dimensional framework including supply decomposition, long-term demand comparison, order price comparison, customer commitments/capacity coverage multiples, service margins, and relative valuation. On the supply side, the 146GW is split into about 82GW of medium and large utility-scale gas turbines and about 64GW of behind-the-meter-related small gas turbines, reciprocating engines, and fuel cells; on the demand side, it references a long-term average of about 42GW per year in gas turbine orders from 1980-2026, and stress-tests assumptions of 50GW annual U.S. data center additions, with about 15GW grid-connected and about 35GW of behind-the-meter demand.

Methodology notes

• Supply-demand modelGas Turbine and Power Solutions Supply Model

  2030 supply capacity reassessment

  Morgan Stanley raises its 2030 gas turbine and main power solutions supply forecast from 135GW to 146GW, with additions including GEV's 6GW capacity expansion, ERock's inclusion in engine supply, and Cummins' extra 1GW of capacity from order wins.

• Market segmentationUtility Scale vs Behind-the-Meter

  Segmentation of utility-scale and behind-the-meter power solutions

  The report splits supply into about 82GW of medium and large gas turbines and about 64GW of behind-the-meter power solutions, arguing that the latter is more dependent on the pace of U.S. data center construction and faces higher oversupply risk.

• Valuation comparisonRelative EV/EBITA

  Relative valuation discount

  The report states that Siemens Energy currently trades at about 12.4x 2028 EV/EBITA, roughly a 50% discount to GEV, and therefore its valuation is still not demanding.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Siemens Energy / ENR

  Core bullish target

  Strengths

  Strong order visibility, with less need for incremental capacity than GEV; room for upside in new order pricing and gas service margins; about a 50% discount to GEV on 2028 EV/EBITA.

  Weaknesses

  Gas new equipment and grid margins may normalize after 2030, potentially slowing group EBITA growth.

  Comparison

  It trades at a significant valuation discount to GEV, and the report believes its customer commitments-to-capacity ratio is lower than GEV's, making it less likely to require the same scale of incremental capacity additions.

  Risks

  Lower terminal margin assumptions for 2030-2035, looser supply-demand conditions, and order pricing upside falling short of expectations.

• Wartsila

  Core bearish target

  Strengths

  Energy new equipment backlog margins have improved by 500bps since early 2025, and engines are cost-competitive in some 500MW data center scenarios.

  Weaknesses

  Competition in the behind-the-meter market is intensifying, delivery slots are already scheduled through 2029, and energy orders may decline over the next 12 months.

  Comparison

  The report sees more limited upside relative to gas turbine peers such as Siemens Energy.

  Risks

  Behind-the-meter market oversupply, new entrants taking orders, and data center demand growth undershooting supply expansion.

• GE Vernova / GEV

  Industry pricing and capacity benchmark

  Strengths

  Strong 2Q26 power orders, customer commitments expected to reach 125GW by end-2026, and new order pricing expected to rise about 46% YoY in 2026.

  Weaknesses

  A 25% increase in large gas turbine capacity has raised industry supply concerns.

  Comparison

  GEV customer commitments are about 4x its future 30GW capacity, versus about 3x for ENR.

  Risks

  New capacity could loosen future supply-demand balances, raising doubts over the sustainability of elevated pricing and margins.

• New entrants/alternative solution suppliers such as CAT, Cummins, FTAl, and Hyundai

  Competitive variable in the behind-the-meter market

  Strengths

  Shorter delivery times, relatively lower capex requirements, and some companies have already validated demand with large order wins.

  Weaknesses

  They have a shorter track record in prime power applications, and long-term cost competitiveness and demand durability remain debated.

  Comparison

  Relative to traditional large gas turbine suppliers, these vendors benefit more from customers' focus on time to power and shorter lead times.

  Risks

  If incremental data center demand is insufficient or large gas turbines replace bridge solutions, behind-the-meter equipment may face oversupply.

Key data

• 2030 gas turbine and power solutions supply forecast146GWThe previous forecast was 135GW.
• Behind-the-meter market-related supplyabout 64GWIncludes small gas turbines, reciprocating engines, and fuel cells, which the report sees as having the highest oversupply risk.
• Medium and large utility-scale gas turbine supplyabout 82GWSupply is above historical demand, but whether it is oversupplied is unclear.
• Long-term average gas turbine ordersabout 42GW/yearLong-term historical average from 1980-2026.
• Assumed annual U.S. data center additions by 203050GWOf this, about 15GW is grid-connected and the remaining about 35GW is behind-the-meter demand.
• GEV customer commitmentsabout 125GW by end-2026About 4x its future 2030 capacity of 30GW.
• Siemens Energy customer commitmentsabout 90-100GW by end-2026About 3x its future 30GW combined-cycle capacity, with a higher share of firm backlog.
• GEV 2026 new order pricingabout +46% YoYManagement commentary indicates 2026 new order pricing is significantly above 2025 and more than double 2024.
• Possible range for Siemens Energy 2030 gas service EBIT margin25%-30%The report believes it could exceed Morgan Stanley's 25% and the market consensus of 24.2%.
• Siemens Energy relative valuation12.4x 2028 EV/EBITAThe report says this is about a 50% discount to GEV.

Impact & implications

The investment implication is that market discussion around the gas turbine value chain will shift from short-term order strength toward the sustainability of margins after 2030. Siemens Energy still has a path to upgrades in the near term from orders, pricing, service margins, and new 2030 targets, so the report maintains a positive view; however, if gas new equipment and grid margins fall back from around 25% to around 20% in 2030-2035, even if still above historical peaks, group EBITA growth could slow materially. For behind-the-meter power solution suppliers, added capacity and order validation for new entrants will intensify competition, especially if U.S. data center demand growth is constrained by permitting, labor, and costs, putting pressure on valuations and order durability.

Risks

• Behind-the-meter power solutions supply grows too quickly, exceeding actual U.S. data center construction and non-grid demand.
• Gas new equipment and grid margins normalize from high levels after 2030, pressuring Siemens Energy's long-term EBITA growth.
• Permitting, labor, and construction cost constraints make scenarios of more than 50GW annual U.S. data center additions difficult to achieve.
• New entrants and short-lead-time equipment suppliers continue winning orders, reducing order opportunities for established suppliers such as Wartsila.
• Current strong order pricing may reflect product mix, and if slot reservation conversion is insufficient in the future, pricing upgrades may slow.
• Long-term earnings forecasts for 2030-2035 are highly uncertain, and the terminal margin assumptions used in valuation may change.

What to watch

• Whether Siemens Energy's gas orders in its August 4 3Q26 results beat expectations.
• Siemens Energy's new 2030 targets and backlog margin disclosure on November 11.
• GEV's subsequent large gas turbine capacity expansion, customer commitments, and pricing trends.
• The actual pace of U.S. data center annual capacity additions, grid-connection ratios, and behind-the-meter power demand realization.
• Changes in Wartsila's energy orders over the next 12 months and the impact of its production schedule through 2029 on new orders.
• Order validation and delivery capabilities of new entrants such as FTAl, Cummins, CAT, and Hyundai in the behind-the-meter market.