Behind-the-Meter Energy Sector Experiences Broad Sell-Off Amid Hyperscaler Capex Doubts

The behind-the-meter energy sector has seen a broad sell-off on Tuesday, with companies like FTAI Aviation (NASDAQ:FTAI), GE Vernova (NYSE:GEV), and Caterpillar (NYSE:CAT) all experiencing declines. The pain is not limited to these few names, however, as the entire group is seeing red. The catalyst for this downturn appears to be a Wall Street Journal analysis that highlighted the scale of hyperscaler power commitments disclosed in SEC filings.

The report found that nine top tech companies had some $3 trillion of off-balance-sheet commitments mostly related to AI, with those obligations growing faster than traditional capital expenditures (capex). This has led to doubts about the durability of hyperscaler capex, which is causing a rotation out of AI-levered industrials. The 30-Year Treasury has also hit a 19-year high today, and the 10-year sits at 4.68%, further compressing the present value of long-duration BTM backlogs.

Despite strong fundamentals for companies like FTAI, GE Vernova, and Caterpillar, their shares are down due to profit-taking and a re-evaluation of their valuations. FTAI Aviation, in particular, has seen its stock price decline by 7% after being up 6% on the week and 16% year-to-date.