Wall Street Is Betting on a Geothermal Breakthrough. These Stocks Could Benefit
The AI boom has revived interest in an energy source that spent decades on the sidelines. Geothermal power draws heat from deep underground to generate electricity, but its growth has long been limited to places with the right geological conditions.
Now, Morgan Stanley believes advances in drilling technology could trigger a shale-style revolution, opening a new investment opportunity as data centers search for reliable power.
Why geothermal is gaining ground
The breakthrough comes from technology already familiar to the oil and gas industry. Enhanced geothermal systems (EGS) use horizontal drilling and hydraulic fracturing to access underground heat in places where conventional geothermal plants wouldn't work.
That could dramatically expand the industry's reach. Morgan Stanley estimates that suitable hot rock exists beneath roughly 85% of the US, allowing developers to build projects well beyond traditional geothermal regions.
The bank also sees a familiar pattern emerging. Much like the early shale industry, geothermal developers are getting faster and cheaper at drilling, potentially bringing previously uneconomical projects within reach.
Morgan Stanley believes those improvements could unlock more than $300B in investment by 2030.
For perspective, geothermal still accounts for just 0.4% of US utility-scale electricity generation. The opportunity is substantial, but so is the distance between today's industry and what investors are betting it could become.
Big Tech is driving demand
AI data centers are pushing electricity demand higher, creating a market for geothermal's biggest advantage. Unlike wind and solar, it can produce electricity around the clock without depending on the weather.
Google is already committing money to the technology. In early September, Fervo Energy signed a 396 MW power purchase agreement with Google for its Cape Station project in Utah, with room for further expansion.
The deal follows an earlier agreement involving Google and NV Energy, giving Fervo a growing base of contracted electricity sales.
Fervo's Google Deal Dwarfs Its First Geothermal Block
Contracted capacity and project size, megawatts, as of Q2 2026
Bar chart. Total contracted capacity (Q2 2026): Megawatts (MW) 658. Google Cape Station PPA (Sept 2026): Megawatts (MW) 396. Google and NV Energy PPA (June 2024): Megawatts (MW) 115. First GeoBlock (Cape Station): Megawatts (MW) 33.
Source: EnergyOnline, Ainvest
Fervo's existing agreements represent 658 MW of contracted capacity and a potential $7.2B revenue backlog.
Its first 33 MW unit at Cape Station also reached commercial operation in September, marking an important step toward proving the technology can work beyond smaller demonstration projects.
There is still plenty of room to grow. The US currently has around 4 gigawatts of geothermal generating capacity, while the Energy Department estimates enhanced geothermal could reach 90 gigawatts by 2050.
Reaching that scale would require years of construction, financing and further cost reductions.
The stocks Morgan Stanley likes
Morgan Stanley sees Ormat Technologies as the safer geothermal play. The company develops and operates plants under long-term contracts, generates a roughly 43% EBITDA margin, and benefits from its own equipment manufacturing business.
Its established operations make it less dependent on future projects than newer developers.
Fervo Energy offers greater upside but carries more risk. The company went public in May, and it reported a $55.9M second-quarter loss and expects just $60M to $80M in revenue for 2027.
Oilfield services companies offer another route. Morgan Stanley expects SLB, Halliburton and Baker Hughes to benefit from rising drilling activity, giving investors exposure to geothermal without depending on individual projects.
Who Gets Paid If Enhanced Geothermal Scales
Companies and their role in the enhanced geothermal buildout, as of November 2026
| Company | Role in the trend |
|---|---|
| Ormat Technologies | Established geothermal operator, owns and runs plants under long-term power contracts |
| Fervo Energy | Pure-play enhanced geothermal developer, first greenfield EGS plant in commercial operation |
| SLB | Oilfield services, drilling work as enhanced geothermal scales |
| Halliburton | Oilfield services, drilling work as enhanced geothermal scales |
| Baker Hughes | Oilfield services, drilling work as enhanced geothermal scales |
Source: MarketWatch, Ainvest
Where the risks lie
The cleanest buy is the oilfield services group, since geothermal drilling adds revenue on top of their established businesses.
Ormat offers more direct exposure with contracted cash flow, although its roughly $544M in capital spending exceeds its $279M in operating cash flow, while net debt sits near $2.9B.
Fervo is the speculative bet to avoid for now. In October, Morpheus Research alleged that the company had understated water losses, declining reservoir temperatures and seismic damage, claiming water losses approached 30%.
CEO Tim Latimer disputed the report's characterization, noting that Project Red recovered 70% of its water.
The company has roughly $2.1B in cash and is targeting construction costs of $5,500 per installed kilowatt for its next GeoBlock. Still, a broader pullback in clean technology financing adds another challenge.
For investors, the next test is whether geothermal developers can turn cheaper drilling and growing AI demand into profitable projects.
