Chevron Expands Power Generation Plans for U.S. Data Centers

Chevron Corporation CVX, a major player in the global oil and gas sector, is moving forward with its plans to meet the growing energy demands of data centers across the United States. With the global shift toward artificial intelligence (“AI”) and the rapid expansion of Big Tech, data centers are becoming increasingly power-hungry, requiring a reliable and consistent energy supply. CVX’s foray into this sector marks a significant departure from traditional operations, as it seeks to tap into the surging electricity demand of data centers by developing energy solutions powered primarily by natural gas. Surge in U.S. Data Center Energy DemandEnergy consumption for U.S. data centers is expected to skyrocket over the next few years, with a projected tripling of demand. The increasing reliance on AI and the expansion of cloud computing are the primary drivers behind this surge. Data centers, which house vast amounts of servers and computing infrastructure, are essential to these technologies. As AI evolves, these facilities require more power to operate, placing a strain on the nation's existing power generation capabilities.To keep up with this demand, major technology companies have entered into long-term power purchase agreements with energy providers. These deals allow Big Tech to access vast quantities of electricity quickly, including purchasing power directly from nuclear plants and signing agreements with utilities to expand grid capacity. This has, in turn, created a ripple effect across the energy market, with the oil and gas giants, such as CVX and Spring, TX-based integrated oil and gas company Exxon Mobil Corporation XOM, recognizing the opportunity to diversify their portfolios and enter the power generation business. CVX’s Strategic Move Into Power GenerationCVX is stepping into the power generation space with ambitious plans to develop data centers and the energy infrastructure needed to supply them. Recently, the company entered the permitting and engineering phases for multiple U.S. sites, positioning itself as a key player in the race to meet the growing power needs of data centers. Daniel Droog, vice president of Power Solutions at CVX, highlighted its efforts to address the high demand for power, stating, "The customer interest is high." This indicates the company’s strong position in the market.CVX is particularly focused on meeting the needs of data centers that are expanding rapidly to keep pace with the tech industry's growth. Many new facilities, which traditionally operated at around 20 gigawatts (“GW”), are now being built to operate at up to 50 times that size. These massive data centers require as much electricity as a mid-sized city and their growth shows no sign of slowing down. To keep up with this, CVX is targeting the development of energy solutions that will provide up to 1 GW of capacity, with plans for these projects to come online by 2027 or 2028. Natural Gas: Power Behind CVX’s Data Center PlansCVX's energy solution for these data centers will be powered primarily by natural gas. This is a significant shift from the previously dominant trend in the tech industry, where companies have moved toward renewable energy sources. The use of natural gas is not only due to its abundance in the United States, which is the world’s largest producer of natural gas, but also due to its relatively low cost and ability to be deployed quickly compared with other forms of energy generation, such as nuclear power.While Big Tech companies have made commitments to transition to renewable energy sources, they are increasingly turning to natural gas to meet the immediate power needs of their data centers. The flexibility of natural gas-fired power plants, along with their ability to be built and scaled quickly, makes them an attractive solution in the face of soaring demand for electricity.CVX’s decision to use natural gas as a key power source aligns with the broader strategy to integrate energy generation into its existing portfolio. As part of its initiative, CVX has already placed an order for seven gas turbines, scheduled for delivery in 2026 from GE Vernova Inc. GEV, a leading energy equipment manufacturer and services provider.These turbines will help generate the necessary power for the company’s growing network of data centers. Notably, the turbine market is experiencing significant backlogs, with some companies reporting delays of up to five years for large turbine deliveries, underscoring the increasing demand for such equipment. CVX’s Strategic Moves in the Oil SectorAdding to its forward-looking energy plans, CVX has also been making strategic investments in its oil and gas portfolio. Recently, CVX increased its stake in Hess Corporation HES, a New York-based oil and gas exploration and production company, by 4.99%, purchasing approximately 15.38 million shares for $2.3 billion. This acquisition highlights CVX’s confidence in its $53 billion all-stock acquisition of Hess, which is focused on securing a key stake in Guyana’s Stabroek block.The deal is currently awaiting arbitration in May due to challenges from Hess’ partners, XOM and CNOOC. CVX’s offer of 1.025 shares per Hess share would value the acquisition at $162.69 per Hess share, based on its closing price.This strategic move highlights CVX’s broader commitment to expanding portfolio, diversifying energy production capabilities and ensuring access to key resources that will support its operations in the future, including energy solutions for the tech sector. Future of CVX’s Data Center Energy SolutionsCVX’s data center projects are set to have a profound impact on the U.S. energy market. The company is working on developing a mix of energy solutions, including natural gas, carbon capture technologies and even the potential incorporation of renewable energy. This diversified approach will allow CVX to meet the unique needs of its customers, while also contributing to the evolving energy landscape in the United States.CVX’s data centers are expected to be off the grid, meaning they will rely primarily on self-generated power rather than drawing from the public utility grid. This autonomy will ensure that the company can deliver consistent, reliable power to its customers, even as demand for energy reaches new heights. Regional Expansion and GrowthCVX is strategically targeting regions that are poised for rapid growth in data center development. These areas include the southern United States, the western interior and the Midwest, all of which are expected to see substantial increases in data center construction in the coming years. As part of expansion plans, CVX is also exploring the potential for incorporating carbon capture technologies into its facilities, further aligning operations with future sustainability goals.With the growing importance of data centers and their energy needs, CVX’s entry into this market is timely and poised for success. As energy demand continues to rise, CVX is positioning itself as a leading provider of power solutions that will drive the future of the tech industry. Zacks RankCurrently, CVX, XOM, GEV and HES each carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.3% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Chevron Corporation (CVX): Free Stock Analysis Report Exxon Mobil Corporation (XOM): Free Stock Analysis Report Hess Corporation (HES): Free Stock Analysis Report GE Vernova Inc. (GEV): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks