Microsoft (MSFT), Chevron, and Engine No. 1 Ink Power Supply Agreement for Data Centers

Tech giant Microsoft (MSFT), energy major Chevron (CVX), and investment fund Engine No. 1 have signed an exclusive agreement for power generation and supply, Bloomberg reported. The move comes as tech companies are making aggressive efforts to secure power supply for their data centers and stay competitive amid the ongoing AI boom.

MSFT stock has declined more than 23% year-to-date due to several reasons, including concerns about elevated capital spending. However, most analysts remain bullish on the company’s long-term prospects.

Microsoft Secures Power Supply with New Agreement

According to Bloomberg, Microsoft, Chevron, and Engine No. 1 have signed an exclusivity agreement for a proposed power generation and electricity offtake arrangement. However, the report added that no commercial terms have been established yet and that “there is no definitive agreement” binding the companies.

Interestingly, Chevron and Engine No. 1 announced a partnership last year to build natural-gas-based power plants for data centers, without disclosing the end user. The two companies chose a site near Pecos, close to the Texas-New Mexico border in the Permian Basin. With Microsoft in the picture, the deal will assure a long-term customer for the power plant and funding from the tech giant for construction.

The Bloomberg report noted that the project, expected to be operational before 2030, is projected to cost about $7 billion and still needs tax and environmental approvals. The deal will ensure power for Microsoft’s growing data centers as the company faces intense rivalry from cloud computing giants Amazon (AMZN) and Alphabet (GOOGL) amid the ongoing AI race.  

Is Microsoft Stock a Buy, Sell, or Hold?

Currently, Wall Street has a Strong Buy consensus rating on Microsoft stock based on 33 Buys and three Holds. The average MSFT stock price target of $586.30 indicates 58.4% upside potential.