Ryan Kirby, junior partner, and Joseph Lakaj, analyst, at Alderman & Co assess how unprecedented demand for turbine technology thanks to AI ‘megadeals’ is both a challenge and an opportunity
Throughout 2025, the rapid expansion of artificial intelligence put tech hyperscalers in an impossible position: wait years for utility companies to catch up or find another way to keep the lights on. They chose the latter.
Faced with multi-year queues for standard grid interconnections, major players began pouring capital into on-site power generation, effectively going around the overloaded electrical grid altogether.
This has created a massive secondary market for the Aerospace & Defence industry, which must now supply aero-derivative gas turbines to tech giants in addition to meeting record-high demand for commercial and military aircraft.
In 2025, year-over-year power infrastructure demand from tech companies reached record highs.
The US Department of Energy estimates that data centre power demand could consume between 6.7% and 12% of all US electricity by 2028, with annual consumption skyrocketing from 176 terawatt-hours (TWh) in 2023 to as much as 580 TWh by 2028.
Recognising that traditional grid interconnection timelines would stall AI compute expansion, data centre operators shifted their corporate strategies to prioritise immediate, on-site power.
Acquiring aero-derivative gas turbines has emerged as a fast solution for this requirement, as these units consist of flight-proven jet engines modified for ground-based electrical generation.
Key examples include GE Vernova’s LM6000, derived from the CF6 jet engine; Rolls-Royce Power Systems’ units derived from the RB211 and Trent engines; and Mitsubishi Power’s FT8 and FT4000 series, which are derived from Pratt & Whitney’s JT8D and PW4000 engines.
While these engines provide the rapid deployment and high reliability needed for data centres, the resulting “megadeals” from tech giants have created a massive secondary draw on aerospace manufacturing capacity.
The combination of surging AI power demand and a failing electrical grid has intensified supply-chain constraints for ground-based turbines as they share a near-identical manufacturing base with flight-ready jet engines.
Both aero-derivatives and commercial jet engines rely on the same specialised components, including high-temperature alloys, complex castings, and precision forgings, which are produced in the same facilities.
Although the total volume of aero-derivative units is significantly lower than that of commercial flight engines, for historical context, GE’s most popular aero-derivative, the LM6000, has shipped just over 1,300 total units globally throughout its entire lifespan, while the demand for commercial flight engines is also stronger than ever, with GE Aerospace reporting they delivered 2,386 engines in 2025.
However, the high margins from the aero-derivative gas turbines, which provide GE Vernova a 16-18% EBITDA margin, and the immediate demand from tech firms have created multiple priorities for engine producers.
This competition for limited manufacturing capacity means that a ‘megadeal’ for data centre power directly consumes the same resources needed to build and maintain aircraft engines.
In the latter half of 2025, this reallocation emerged as the primary engine of disruption for commercial aircraft OEMs. OEM backlogs at Boeing and Airbus are stretching out years, heavily constrained by engine delivery shortfalls.
As engine makers struggle to balance lucrative energy contracts with their aviation commitments, new airframes are coming off assembly lines, facing extensive wait times for engines.
Just last month, a Wall Street Journal article was published where Airbus mentioned that it would deliver fewer aircraft than expected this year because of significant shortages of Pratt & Whitney engines, with the CEO of Airbus, Guillaume Fraury, mentioning, “It’s a frustrating situation to be in” when asked about their need to scale back their ambitious production goals.
Although immense pressure on production lines in 2025 sidelined airframe OEMs and tier-two suppliers with delivery hurdles and trapped liquidity, what emerged has been well-capitalised MRO (Maintenance, Repair, and Overhaul) providers and engine lessors stepping in.
With significant inventory, these entities have outmanoeuvred traditional players by capitalising on the intense market demand with airlines requiring spare legacy engines to bypass the Boeing and Airbus delays, and energy developers converting those same engine cores into 25-megawatt power stations for AI.
As the unprecedented competition for engine cores drives backlogs to multi-decade highs across both aerospace and data centre industries, the global supply chain for the engines that support these markets will remain under heavy pressure throughout 2026.
At Alderman, we are monitoring how these dual-industry bottlenecks, which translate directly into extended aircraft delays, will have a long-term impact on the broader aerospace supply chain.
We have not seen our clients, often tier-two and three commercial aviation suppliers, aggressively pursue this new engine market yet, but it is certainly on their radars as the market becomes more compelling.
Links:
https://www.gevernova.com/sites/default/files/gev_webcast_presentation_12092025.pdf
https://www.gevernova.com/gas-power/products/gas-turbines/lm6000
https://power.mhi.com/regions/amer/insights/us-power-outlook-and-long-term-trends
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