Fermi Inc. (NASDAQ:FRMI) saw its share price jump by 21 percent on Tuesday to finish at $7.12 apiece, after officially bagging its first billion-dollar deal for its flagship development in Texas.
In an updated report, the company said that it inked a definitive agreement with TensorWave TEX1 LLC—a subsidiary of AI cloud provider TensorWave Inc. for the 15-year lease covering 222 MW of total facility power capacity at its Project Matador campus in Carson County.
Fermi Inc. (NASDAQ:FRMI) said that the lease is expected to generate approximately $6.5 billion in total revenues over the initial term for the first phase alone.
Rendering of Fermi’s Project Matador. Photo from Fermi website
The agreement also covered the option for TensorWave to lease two additional data centers, which, if exercised, would bring the overall deal to more than 650 MW.
“A lease of this size and this term is a tremendous vote of confidence in Fermi,” Chairman Marius Haas said.
“In delivering this first binding agreement, we’ve now fulfilled the most important objective we shared with the market in May. The committed partner ecosystem of developers, guarantors, and financing providers is all industry-leading companies, and TensorWave is exactly the kind of anchor customer our project was designed for,” he added.
Delivery of the first phase is targeted in the second half of 2027.
Hillcore to Power Matador
In line with the deal, Fermi Inc. (NASDAQ:FRMI) also partnered with Hillcore Energy Capital Corp. for the development and operations of a new power center at the Matador campus.
In a statement, Fermi Inc. (NASDAQ:FRMI) said that Hillcore is set to develop a 2.6GW power complex under a Build-Own-Operate-Transfer structure.
The Hillcore Power Center will comprise approximately 2.5 GW of natural gas-fired generation, developed in phases, together with approximately 100 megawatts (MW) of solar generation and battery energy storage. Construction of the first power block, approximately 350 MW, will begin on execution of definitive agreements, with first power targeted within 24 months of notice to proceed.
Buy Rating
Following the announcement, investment firms Mizuho, Cantor Fitzgerald, and Citizens all reaffirmed their positive ratings for the company.
Mizuho, for its part, reiterated its $11 price target and outperform rating, saying that the “long-awaited catalyst” has come, while Cantor Fitzgerald reaffirmed its buy recommendation with an $8 price target.
Citizens, on the other hand, maintained a market outperform rating alongside a price target of $30.
Hedge Funds Buy In, But Conviction ‘Modestly Up’
Hedge fund sentiment remained positive for Fermi Inc. (NASDAQ:FRMI) in the first quarter of the year, as evidenced by the sharp increase in funds holding the stock.
However, conviction appeared weak amid the relatively modest growth in total holdings, which signaled that conviction remained limited.
Data from Insider Monkey showed that 51 hedge funds owned shares in the company during the period, up markedly from 40 in the previous quarter.
However, their combined holdings only marked a 3.5 percent increase to $165.6 million from $160 million quarter-on-quarter, signaling that while more funds are establishing positions, they remained cautious about committing substantial capital, potentially waiting for further catalysts to perk up buying appetite.
Looking ahead, investors will likely be waiting for more 13F filings in the second quarter to gauge whether the TensorWave agreement has strengthened institutional conviction.
While we acknowledge the risk and potential of FRMI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than FRMI and that has 10,000% upside potential, check out our report about the cheapest AI stock.
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