Chevron Could Build a $7 Billion Gas Plant to Power Microsoft's AI Ambitions. Time to Buy the Energy Giant?

Chevron and investment fund Engine No. 1 are reportedly nearing a deal with Microsoft to construct a 2.5-gigawatt natural gas-fired power plant in West Texas. The proposed $7 billion facility, one of the largest in the U.S., is intended to supply electricity to a major AI data center campus for Microsoft. This project represents Chevron's strategy to meet the burgeoning power demands of the artificial intelligence sector and monetize its natural gas production from the Permian Basin. The partnership between Chevron and Engine No. 1, established last year, aimed to develop "power foundries" for data centers, initially targeting up to 4 GW of capacity. Securing Microsoft as a customer for this first significant power project would allow the partners to move forward with the large-scale plant, converting associated natural gas from Chevron's oil operations into electricity. This initiative offers Chevron a new growth avenue, supporting its goal of more than 10% compound annual free cash flow growth through 2030, and diversifying its energy businesses.