Key insights
- UBS reiterated a Buy rating on Chevron following news of a partnership with Microsoft to develop natural gas-powered plants for AI data centers. The $7 billion project in Texas aims to supply 2,500 megawatts of electricity. This signals increasing energy demand from the AI sector and potential growth opportunities for energy companies, but the impact on the broader market is limited.
Investing.com - UBS reiterated a Buy rating and $212.00 price target on Chevron (NYSE:CVX) following news of a power generation partnership with Microsoft.
Microsoft and Chevron, alongside investment firm Engine No. 1, have entered into an exclusivity agreement to develop natural gas-powered plants in Texas to supply electricity directly to Microsoft’s AI data centers, according to Bloomberg. The partnership aims to build an off-grid power complex to support rising AI demand.The deal comes as Microsoft trades at a P/E ratio of 23.23, which InvestingPro data suggests is low relative to near-term earnings growth. Despite the stock declining 28% over the past six months, analysis indicates Microsoft remains undervalued based on Fair Value assessments—one of 13+ ProTips available to subscribers.
The proposed natural gas fired power plant in West Texas is projected to cost about $7 billion and initially generate 2,500 megawatts of electricity, making it one of the largest off-grid solutions. The power project in Pecos could be operational by late 2027, according to Bloomberg.
The facility would take three years to ramp up to 2,500 megawatts of capacity. UBS analyst Manav Gupta maintained the Buy rating and $212.00 price target on the stock.
The partnership represents a direct power supply arrangement between an energy company and a technology firm seeking to meet electricity demands for artificial intelligence infrastructure.
In other recent news, Microsoft announced a significant investment of over $1 billion in Thailand to enhance its cloud and artificial intelligence infrastructure. This initiative aims to expand Microsoft’s data-center capabilities and foster local talent development in the region. Additionally, Piper Sandler reiterated its Overweight stock rating for Microsoft, highlighting the company’s expansion of its Researcher capabilities with new features, Critique and Council, which utilize models from OpenAI or Anthropic. Meanwhile, UBS lowered its price target for Microsoft to $510, citing concerns related to Microsoft 365 after investor meetings in Asia and Australia. Despite this, UBS maintained its Buy rating on the shares. BofA Securities reinstated coverage on Microsoft with a Buy rating and set a price target of $500, pointing to robust growth prospects in cloud and artificial intelligence. In the infrastructure sector, Raymond James reported a 2% decline in March, while noting that an Aecon-led joint venture secured a significant contract for the Arctic Over-the-Horizon Radar Program. Raymond James anticipates ongoing demand for defense-qualified contractors and engineering firms due to the program’s scale. These developments reflect the dynamic landscape in which Microsoft and other companies are operating.
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