Fermi Rides AI Energy Wave to $19.3 Billion Debut Amidst Race for Power

The debut of Fermi marks a striking success story driven by the intense market demand for artificial intelligence (AI) infrastructure. The energy real estate investment trust (REIT) successfully raised $682.5 million in its U.S. listing. The Texas-based group's initial public offering (IPO) saw its shares, trading under the symbol FRMI, rise a remarkable 55% in their debut on the Nasdaq Global Select Market. Shares, priced within a marketed range of $18 to $22, closed at $32.53 on Wednesday.

This immediate investor hunger for AI exposure translated into a substantial market value of about $19.3 billion for the Amarillo, Texas-based company, based on outstanding shares. The strong performance continued into its second day of trading, with the stock tracking a 76% rise from the initial $21 offering price. Shares of Fermi are also expected to begin trading on the London Stock Exchange.

The immense valuation is noteworthy given Fermi was founded only in January and has yet to generate any revenue. However, investors are treating Fermi as a crucial new entry point into the AI sector, as traditional power producers that serve as effective proxies for the booming technology have already seen their shares run up. Morningstar analyst Travis Miller observed that there are "limited ways to play the AI energy demand angle". The proceeds from the IPO are designated to fund new power plants required for the company's AI data centers.

Fermi’s ambitious development is centered on "Project Matador," a large-scale advanced energy and data center campus encompassing more than 5,000 acres of land leased from Texas Tech University. The site is also referred to as the President Donald J. Trump Advanced Energy and Intelligence Campus. The company hopes to draw data center and hyperscaler tenants to the Texas Panhandle.

The scale of the project is massive. Fermi expects to deliver one gigawatt of power online by the end of 2025. Its long-term goal is to have up to 11 gigawatts of power available by 2038, utilizing a combination of natural gas, solar energy, and nuclear power to run the computing centers. According to CEO Toby Neugebauer, this future capacity could generate double the electricity amount currently serving all of New York City.

This infrastructural drive is vital, as data centers globally are projected to consume over 4% of electricity by 2035. This surge has prompted electric grids and companies alike to race to meet demand. Key figures supporting this infrastructure push include Fermi co-founder Rick Perry, a former governor of Texas and U.S. Secretary of Energy under President Donald Trump, who holds a director position. CEO Toby Neugebauer controls the largest stake in the company, worth over $4.5 billion.

Despite the massive potential and strong growth outlook, some market strategists view the listing as potentially a sign of "late-stage AI excitement". The primary hurdle is that Fermi must quickly find a way to generate revenue. Nevertheless, investors like Tortoise Capital, which participated in the IPO, recognize the strong growth potential, noting the robust demand among megacap tech companies to secure immediate access to electricity and get these data centers built. The US government has also put significant weight behind the AI sector, emphasizing the need to build "artificial intelligence factories... close to where the power is produced".