Elon Musk Is Betting Big on Natural Gas. Here's What It Means for Energy Stocks.
Despite his role in revolutionizing the electric vehicle industry with Tesla, Elon Musk's second-most famous company, Space Exploration Technologies (SPCX 6.18%) or SpaceX, is set to rely on a fossil fuel, natural gas, to power its xAI's data centers and enable it to make launch fuel for its Starship rockets. These developments underline the role of natural gas not only in the old economy but also as an integral part of the new economy. Here's what it means for natural gas stocks and how to invest in them.
SpaceX needs natural gas
Colossus and Colossus II, xAI's main data centers, rely primarily on natural gas for power. Moreover, in SpaceX's initial public offering (IPO) filings, management states that "Going forward, COLOSSUS II is expected to be primarily powered by a dedicated natural gas power plant."
Moreover, SpaceX has also stated that "our ability to scale our infrastructure depends in part on our continued access to natural gas supply at economically feasible prices." In addition, launching rockets such as Starship requires launch fuel made from natural gas; to ensure a steady supply, SpaceX plans to build a natural gas pipeline. This is a key requirement if Starship is to be launched on a repeated basis as planned.
Image source: Getty Images.
The past is natural gas, the future is natural gas
Think about it: Starship launch fuel and natural gas pipelines, data center power and natural gas-powered turbines, and even the prospect of SpaceX drilling its own natural gas all supports the idea that natural gas is a key fuel as the world moves toward more renewable energy. Beyond that, natural gas is a fuel that will remain integral to the economy for decades to come.
Two energy-related stocks to buy
GE Vernova (GEV 4.54%) is the world's largest gas turbine company. The company's sales and backlog have soared in recent years due to the insatiable demand for power from AI data centers. Demand is so strong that the company can sign slot reservation agreements (SRAs) with customers, under which customers pay up front to secure future equipment manufacturing spots.
Today's Change(-4.54%) $-47.04Current Price$989.18
It's a far cry from the days when most of the business was in GE Power as part of the former General Electric. Less than a decade ago, it was the least loved and least valued of all of General Electric's businesses as demand for gas turbine equipment (the company's core product) faltered amid the clean energy transition.
As if to demonstrate the strength of its markets, the company has already raised its full-year 2026 forecast once this year, and don't be surprised if it does so again when it reports second-quarter results.
In fact, GE Vernova's order momentum is so strong that on the earnings call in April, Chief Executive Officer Scott Strazik said, "In the last 90 days, we've added $13 billion to our total backlog and now expect to reach $200 billion in backlog in '27 versus our previous expectation of '28."
Argan is enjoying an AI boom
It's one thing to sell power equipment as GE Vernova does, and another to handle the engineering, procurement, and construction needs of power companies, utilities, and commercial firms that use power equipment.
Today's Change(-5.97%) $-32.71Current Price$514.80
That's where Argan (AGX 5.97%) comes in. This is another business that's enjoyed an extraordinary change in its fortunes, with the stock up an incredible 1,400% during the past three years, and 95% so far this year. Like GE Vernova, a company whose equipment it implements in its contracts, Argan's backlog has soared in recent years.
Contractors can easily outperform in boom times as orders increase, resources are better utilized, and margins expand dramatically.
AGX Operating Margin (TTM) data by YCharts
Where to next for these energy-related stocks?
The key question for both GE Vernova and Argan is whether demand is strong enough to drive increasingly higher order backlogs. If SpaceX's IPO, spending plans, and commitment to using natural gas are a guide, the answer is likely "yes."
