Fermi Inc. experienced a sharp decline in share price on Friday, dropping as much as 43% after the power developer announced that its first investment-grade tenant had terminated a significant contract. This contract, known as an Advance in Aid of Construction Agreement, was intended to provide up to $150 million to support the construction of Fermi’s proposed artificial intelligence campus in West Texas.
In a filing made on Friday, Fermi disclosed that no funds had yet been drawn under this agreement, which was established on November 4. The termination of the contract represents a notable setback for a company co-founded by former Texas governor Rick Perry, which had initially aimed to create the world’s largest private power grid tailored for AI technology.
Despite this blow, Fermi reassured stakeholders that it is actively engaging in discussions with various other potential electricity customers. The company remains optimistic about its timeline, stating that it is on track to commence power delivery by 2026.
The announcement comes at a time when Fermi’s valuation surged following its public debut, amid a growing demand for electricity to power extensive data centers. This challenge has been identified as part of a larger narrative by the Trump administration, which emphasizes the significance of such infrastructure as a matter of national security and economic competition against China.
However, the company now faces increased scrutiny and competition from other developers in the rapidly evolving and competitive landscape of AI-related infrastructure. Concerns about a potential bubble in this sector have also emerged, adding to the uncertainties surrounding Fermi’s future trajectory.
As of now, Fermi has not provided an immediate response to requests for further comments regarding the situation and its plans moving forward.
