Siemens Energy outrallied Nvidia this year. There is more to come

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Amid the wreckage of Germany’s industrial sector this year, there is one group whose share price rally outstrips even Nvidia’s artificial intelligence-fuelled ascent. This standout was Siemens Energy, the company that in November 2023 required a €15bn German government-backed rescue as it battled a crisis at its wind turbine business.

Shares in the group have surged more than 300 per cent this year (albeit after a difficult 2023), adding about €30bn to its market capitalisation and making it the top performer in the Stoxx 600. Nvidia’s shares are up 187 per cent year-to-date.

A year ago, the question was whether Siemens Energy — spun out of the Siemens conglomerate in 2020 — was at breaking point. Now it is how much further can the shares run?

The rally has more to do with the strength of the company’s other divisions than any rapid improvement at its turbine manufacturing business, Siemens Gamesa. The latter pushed the group to a net loss of nearly €4.6bn in 2023 after faults were discovered with two onshore turbine models. Gamesa made a lower, but still hefty, €1.8bn operating loss for its fiscal year 2024, ending in September.

The other businesses, however, tap into global electrification trends. For example, the “grid technologies” unit makes equipment such as power transformers and switchgears. This sector is in something of a “supercycle” as data centres, China’s electric vehicle boom and net zero targets increase electricity demand, forcing the upgrade and expansion of grid infrastructure.

Siemens Energy’s gas services business, at present its largest by revenue, has also benefited from a push to build more gas-fired power stations in places such as the Middle East and the US.

Those divisions helped Siemens Energy to post a net profit of €1.3bn for 2024. Strong orders meant an upgrade in medium-term financial targets at its results last month.

One concern is whether all this good news is already baked into the shares. Nobody yet knows how long the booming demand for power equipment will last. But with waiting lists for high-power transformers sitting at about six years, according to Deutsche Bank’s Gael de-Bray, it should be a seller’s market for some time.

There could be another tailwind, too. Sum-of-the-parts calculations suggest the market is not at present attributing any value to the wind division. Admittedly, analysts are forecasting another sizeable operating loss of about €1.4bn at Gamesa in 2025. The wind industry is nervously eyeing Donald Trump’s plans. But the Gamesa division is working towards break-even in 2026. In offshore turbines, it still has a market-leading position.

An Nvidia-beating rally will be hard to repeat. But Siemens Energy’s comeback does not end here.

[email protected]