Why Bloom Energy Stock Soared 27%—and What Comes Next

Bloom Energy stock has already nearly quadrupled this year, as of Friday’s close. (Dreamstime)

Key Points

• Bloom Energy shares surged after a $5 billion partnership with Brookfield Asset Management for AI factories.
• Bloom Energy will be the preferred power provider for Brookfield’s AI factories.
• Bloom Energy manufactures fuel cells that convert natural gas or hydrogen into electricity.

Bloom Energy shares took off after the company agreed to a $5 billion partnership with Brookfield Asset Management to use Bloom’s fuel cells to power AI data centers.

Bloom stock rose 27% to $109.91 on Monday.

The company is becoming a go-to supplier of power as AI data centers look for novel ways to get electricity to feed their machines. The stock has already more than quadrupled this year as Bloom has struck deals with companies including Oracle and American Electric Power to help power data centers.

The company’s fuel cells, the size of large refrigerators, can turn natural gas or hydrogen into electricity. They can even be deployed off the electricity grid, allowing companies to bypass the years-long wait to get connected.

Shekhar Pramanick, a portfolio manager at Columbia Threadneedle, Bloom’s largest institutional shareholder, said that Bloom offers companies a more flexible and efficient way to power their data centers. Large natural gas turbines — the central equipment in natural gas plants — are in short supply and have gotten increasingly expensive.

Bloom’s fuel cells are now cost-competitive with them, and could eat into their market share. Pramanick says gas-powered turbines are a $100 billion annual market. “You could see how big the opportunity for Bloom is,” he said.

Brookfield will invest up to $5 billion to deploy Bloom’s fuel-cell technology. The two companies are collaborating on the design and delivery of “AI factories,” or enormous data centers, including a site in Europe that will be announced before the end of the year, the companies said.

“This partnership marks the first investment by Brookfield through its dedicated AI Infrastructure strategy and further validates Bloom’s ability to be a key player in the power infrastructure build-out to support AI,” wrote Evercore analyst Nicholas Amicucci in a research note.

Amicucci raised his target price on Bloom Energy stock to $137 from $100 and kept an Outperform rating. The new target price is based on a enterprise value-to-earnings multiple of 37.5 times his forecast adjusted earnings for Bloom Energy in 2028.

Bloom Energy’s soaring stock price recently led analysts at Jefferies to lower their rating on the stock. They warned that it could be “overextended” and said it needed to start recording significant data-center orders to justify its valuation.

The deal with Brookfield looks like a good start.

Write to Adam Clark at adam.clark@barrons.com