Key Highlights
- Fermi shares climbed 16% to $6.82 during premarket hours following the disclosure of its inaugural data center tenant agreement
- TensorWave, an AI cloud services company, signed a 15-year contract valued at roughly $6.5 billion in aggregate revenue
- The agreement encompasses 222MW of power capacity at Fermi’s Project Matador facility in Amarillo, Texas
- Future expansion provisions could increase the total capacity to more than 650MW across multiple data center sites
- Mizuho maintained its Outperform recommendation with an $11 price objective after the deal announcement
Shares of Fermi (FRMI) experienced a dramatic 16% rally to $6.82 in Tuesday’s premarket session following the company’s announcement that it secured its inaugural tenant for the Project Matador data center development in Amarillo, Texas.
The company signed a 15-year lease arrangement with TensorWave, an artificial intelligence cloud infrastructure provider, representing approximately $6.5 billion in total contractual revenue. The magnitude of the transaction immediately captured Wall Street’s attention.
According to the terms, Fermi will handle the development, construction, and delivery of complete data center facilities to TensorWave through a turnkey structure. TensorWave plans to begin occupying the facilities in stages commencing in the latter half of 2027.
The opening phase encompasses 222MW of aggregate power capacity. Additionally, the lease incorporates expansion provisions for two more data center developments.
Should TensorWave exercise these expansion options, the overall collaboration could exceed 650MW. This would represent a substantial increase beyond the original agreement’s parameters.
Fermi Chairman Marius Haas characterized the deal as a “tremendous vote of confidence” in the organization. He emphasized that securing this lease represented the company’s primary strategic goal since May.
Challenges in Finding a Data Center Partner
The path to this agreement proved challenging. Fermi had experienced considerable difficulty identifying a leasing partner for its expansive 7,570-acre Amarillo property.
These delays contributed to internal tensions. The company parted ways with former CEO Toby Neugebauer in April, with industry observers connecting his departure to the prolonged search for a major tenant.
Prior to Tuesday’s news, Fermi shares had declined 27% for the year. While the 16% premarket surge helps offset those losses, the stock remains below previous levels.
Fermi co-founder Rick Perry, who previously served as U.S. energy secretary and Texas governor, had articulated a vision of constructing the planet’s largest data center facility at this location. This lease agreement represents the initial concrete progress toward that goal.
Analyst Maintains Positive Outlook
Following the lease announcement, Mizuho confirmed its Outperform stance on Fermi, maintaining an $11 price objective.
The shares currently trade at $5.88 based on Investing.com data, with InvestingPro analysis indicating the company appears undervalued compared to its Fair Value assessment.
Mizuho had previously adjusted its price target downward from $27 to $11 due to tenant signing postponements. The firm characterized this lease execution as the long-anticipated catalyst.
Mizuho’s previous projections anticipated 500MW becoming operational in 2027 with an additional 500MW following in 2028.
From a capital perspective, Fermi recently completed a $431.25 million offering of convertible senior notes carrying a 5.00% interest rate, with a 2031 maturity date.
The company also executed a $375 million convertible senior notes offering earlier in 2026. A previous $350 million convertible notes transaction had temporarily pressured the stock.
InvestingPro noted that Fermi has been consuming cash at an elevated rate, although the $6.5 billion contract may significantly alter this trajectory.
Mizuho reaffirmed its Outperform rating following direct conversations with company leadership regarding the agreement’s structure and terms.
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