This Buzzy AI Data-Center Developer Has No Revenue. The Stock Is a Buy, Analysts Say.

Fermi is developing a 5,700-acre data-center campus in the Texas Panhandle. (Courtesy Fermi America)

In the age of artificial intelligence, it turns out that owning 5,700 acres of land in the Texas panhandle can outweigh having no revenue to speak of.

A raft of Wall Street firms initiated coverage of Fermi , a Texas landowner and buzzy energy start-up, in weekend research notes. The company, co-founded by Rick Perry, former energy secretary and governor of Texas, can power data centers for big technology companies in the years ahead, analysts concluded.

Fermi stock jumped 3.7% to $24.40 on Monday. The company went public at $21 a share at the beginning of the month.

Fermi aims to build the world’s largest data-center campus on its acreage near Amarillo, Texas, which it will power using natural-gas plants, nuclear reactors, and more. Analysts at UBS think the plan to build 11 gigawatts of power generation at the site over the next dozen years is plausible given the intense demand.

“The main constraint in this quest for AI dominance is access to power, creating a sellers’ market for those with unencumbered, gigawatt-scale generation deliverable in the next 24 months,” wrote John C. Hodulik of UBS.

Fermi has no revenue today, but it aims to launch one gigawatt of power in 2026. As the company hits more power-generation and commercial milestones, the risk premium of investing in such an early-stage start-up should decline, Hodulik said. UBS initiated coverage with a Buy rating and a $30 price target.

Simply having land and power isn’t a guarantee of profits, though. With less than ten potential hyperscaler tenants and more than 50 potential data-center landlords, the balance of power is tilted toward the tech giants, analysts at Mizuho Securities noted.

But Mizuho argues that Fermi has a couple of significant advantages. First, its parcel of land provides easy access to fiber hookups, water, and the Hugoton and Panhandle gas fields, which span parts of Texas, Oklahoma, and Kansas. Second, it offers a “one-stop shop” for power given the deregulated utility environment in Texas.

“Rapid power at scale is possible,” Mizuho analysts Vikram Malhotra and Anthony Crowdell wrote. The pair issued an Outperform rating and a $27 price target for the stock.

All seven of the analysts polled by FactSet as of Monday rate Fermi a Buy or equivalent. The most bullish among them was Evercore ISI, which initiated coverage with a $37 target price.

The execution risk of building such a massive data-center campus is an understandable concern for investors, the firm said, but the company’s energy expertise and relationship with suppliers such as Westinghouse Electric and Siemens put it in a “very enviable position.”

“We view Fermi as a key foundational holding for ANY investor seeking exposure to the secular AI/datacenter/power demand thematic,” Evercore’s Nicholas Amicucci wrote.

At this point, Fermi has the land, the capital from its $683 million initial public offering on Oct. 1, and the endorsements from Wall Street to support its stock in the near term. Now the hard part—actually making money—begins.

Write to Nate Wolf at nate.wolf@barrons.com