Why Baker Hughes (BKR) Could be a Key Winner From the AI Boom

Baker Hughes Company (NASDAQ: BKR ) was held by 87 hedge funds at the end of Q2 2026 in the Insider Monkey database, with a total stake value of just over $4.1 billion. This is up from 70 hedge fund holders with a cumulative investment of almost $3.5 billion in the previous quarter.

Multiple Catalysts for Earnings and Cash Flow Growth:

Baker Hughes Company (NASDAQ:BKR) delivered a strong second quarter and topped Wall Street estimates in both profits and revenue, despite the headwinds in the Middle East.

The company continues to benefit from the soaring power demand amid the AI boom, with the orders for its Industrial & Energy Technology segment doubling YoY to a record $7.1 billion in Q2. Baker Hughes also raised its full-year 2026 IET orders guidance to $17.5 billion to $19.5 billion. Meanwhile, the segment recently surpassed its 20% EBITDA margin target, strengthening the case that continued growth can translate into attractive incremental profitability.

The energy technology firm is targeting to further expand its gas turbine and generator capacity. When this additional capacity comes online by 2029, the company estimates that it could support nearly $5 billion in annual Power Systems revenue opportunity at full utilization.

Baker Hughes is already seeing strong demand for its power generation equipment. Last month, it secured an order from mobile power generator Dynamis Power Solutions for 76 NovaLT16 gas turbines, paired with gearboxes and generators. The equipment will be capable of generating 1.3 GW of mobile power across a wide range of data center projects and oil and gas applications.

Baker Hughes' recent acquisition of Chart Industries further adds to its appeal. Successfully completed in July, the deal is expected to boost the company's ability to deliver durable earnings and cash flow, driven by an expanded industrial portfolio and enhanced recurring aftermarket services. Chart will operate as Baker Hughes' third reporting segment, with a target of $325 million in annualized cost synergies within three years.

Given the positive outlook, Morgan Stanley tapped Baker Hughes Company (NASDAQ:BKR) as its Top Pick in the energy services and equipment sector, citing the company's improving earnings mix and upside from the integration of Chart Industries. The analyst firm maintains an 'Overweight' rating and $70 price target on the stock, implying an upside of over 8% from the current levels.

A Pullback on Oil and AI Spending Could Weigh on Baker Hughes:

Baker Hughes' OFSE business is still exposed to the volatility in commodity cycles. If global oil and gas prices decline, producers could cut back their drilling and completion budgets, leading to a lower demand for the company's equipment and services. Baker Hughes already signalled in its Q2 earnings call that it expects annual global spending by oil and gas producers to modestly decline this year. The company remains exposed to the disruptions in the Middle East and has already highlighted the uncertainty surrounding its activity in the region.