By Avi Salzman

Fermi, a Texas company aiming to power AI data centers with natural gas plants and nuclear reactors, is racing to public markets faster than almost any company in modern history.

Its IPO priced on Tuesday night, valuing the company at around $13 billion. Just 10 months ago, Fermi didn't even exist. Its field of dreams sits nearly empty today.

Founded in January, Fermi intends to build the largest data center campus in the world on a parcel of land in the Texas Panhandle that it's leasing from Texas Tech University. The 5,236-acre site, roughly nine square miles, will eventually be home to data center warehouses hooked up to natural gas plants, nuclear reactors, solar fields, and batteries, Fermi says. In all, the site could generate five times as much electricity as the Hoover Dam by 2038, the company projects.

The stock is sure to attract attention from investors looking to cash in on the rush for electricity to power AI. But the company faces substantial challenges.

Fermi is like a car being built while it's already in motion. The company is starting to cobble together the equipment it needs for these power plants, but so far it's an ambitious vision without much physical progress. Buying the stock means believing that Fermi can overcome hurdles that have bedeviled better-established infrastructure companies.

Tapping equity markets could get Fermi closer to its goals. The company is selling $682.5 million worth of shares at $21 each to investors in New York and London, through a simultaneous dual-listing on the Nasdaq (ticker: FRMI) and London Stock Exchange. It's structured as a real estate investment trust, or REIT, a kind of business normally known for paying large dividends. Fermi, which has no revenue yet, likely won't pay dividends for years.

There is no company in the stock market today quite like this -- a single-site REIT whose main assets will be power plants that have not yet been built. The closest corollaries might be data center REITs like Equinix -- though Equinix owns the data centers themselves, not the power equipment, and has a 2.4% dividend yield.

Fermi does have some early advantages, including the name recognition of its founders. It was co-founded by Rick Perry, the former governor of Texas and Energy Secretary, his son Griffin Perry, and Toby Neugebauer, a private-equity executive with experience financing power projects. It's well-situated. Fermi's site is located at the edge of a major natural gas field with access to multiple major pipelines that can supply its power plants. The company has secured natural gas turbine equipment, both new and used, at a time when there's a turbine shortage. And it just signed a letter of intent this month with an unnamed data center customer looking to rent space on its campus for as long as 40 years.

Fermi also faces several major hurdles, because its project exists almost entirely on paper. It's aiming to build its first nuclear reactor by 2031, one of four large reactors that will make up the Donald J. Trump Generating Plant. The latest reactors built using the same technology that Fermi is relying on took around 15 years to build, and went way over budget.

The company is unlikely to earn tenant revenue before 2027, and those revenue will build up gradually over time. Meanwhile, the company will have to tap capital markets to fund very expensive infrastructure up front. If it can't get payments from tenants quickly enough to cover its debt needs, the company's business model could teeter.

Timm Schneider, founder of energy consultancy Schneider Capital Group, wrote in a note that the model only works if cash starts flowing in, reducing the company's need to tap high-cost debt. He sees plausible scenarios for Fermi stock to trade in an almost comically wide range: $7 to $105 per share.

"If operational performance stalls, leverage rises, costs snowball, and equity value can unravel--kick-starting a negative spiral," he wrote. "This reflexive, self-reinforcing dynamic must be priced in--history is filled with both positive ( Amazon, Tesla) and negative (dot-com, WeWork) examples of how it plays out."

Those are some inspiring and depressing examples to follow. Investors can join the Fermi ride on Wednesday.

Write to Avi Salzman at avi.salzman@barrons.com

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September 30, 2025 18:55 ET (22:55 GMT)

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