Bloom Energy shares dropped 4% to $229.83 in afternoon trading, marking a significant reversal in the stock's year-to-date performance. The decline follows a period where the company’s shares surged 165%, driven by intense demand for onsite power solutions in artificial intelligence data centers.

The selloff extends to other power equipment manufacturers, though with less severity. Caterpillar stock slid 3% to $727.55, while Generac Holdings shares fell 1% to $195.67. In contrast, broader market indicators remained stable. The Industrial Select Sector SPDR ETF declined just 0.2% to $166.65, and the SPDR S&P 500 ETF Trust edged up 0.1% to $770.43, suggesting the correction is specific to the AI power sector rather than a systemic market issue.

Bloom Energy’s exposure to this trade is direct. The company manufactures fuel cell systems that generate electricity at the point of consumption, a model that allows data center operators to bypass grid capacity waits. This specific utility has made the company a preferred choice for major technology firms. During the presentation of Q2 FY2026 results on July 28, Bloom Energy’s chief executive stated that major US hyperscalers, neoclouds, AI labs, and colocation operators have validated and approved the company’s power solutions, positioning Bloom as a standard for AI onsite power.

The rally was supported by strong financial performance. In Q2, Bloom Energy reported revenue of $1.07 billion, a 165.5% increase year over year. Non-GAAP earnings per share came in at $0.78, significantly exceeding the estimate of $0.41. GAAP operating income swung from a loss to a profit, and product revenue jumped 215% to $935.4 million. GAAP gross margin expanded to 33.4%, while operating cash flow reached $226.4 million.

Despite these results, the stock’s high valuation leaves it vulnerable to shifts in sentiment regarding data center spending. The company identifies a potential slowdown in AI adoption as a key risk, as such a development could reduce the expansion of data center infrastructure that underpins its order book.

Management has raised its full-year 2026 outlook, projecting revenue between $3.9 billion and $4.2 billion. This target assumes continued growth in onsite generation commitments. The guidance also includes non-GAAP EPS of $2.55 to $2.85 and non-GAAP operating income of $800 million to $900 million. Achieving these figures relies on data center builders maintaining their pace of adding onsite power capacity.

Caterpillar and Generac also supply engines and standby generators to data centers, but their customer bases are broader and less dependent on a single end market than Bloom Energy’s. The current market movement appears to be a reallocation of capital away from AI-linked technology names into defensive sectors, with equipment makers most tied to data center power demand absorbing the largest losses.