Microsoft Corporation is engaged in exclusive discussions with Chevron Corp and Engine No. 1 over terms for a large energy complex planned in West Texas that would supply power to a data center campus, company and industry sources said on Tuesday.
The proposal centers on a natural gas-fired generation facility with an estimated construction cost of about $7 billion. Initial output from the plant is expected to be roughly 2,500 megawatts of electricity, according to people familiar with the matter.
These negotiations come as Microsoft and other major cloud providers increasingly seek to expand computing capacity to meet rising demand for artificial intelligence processing. The need to secure reliable and scalable sources of electricity is a core element in those expansion plans.
Microsoft is projected to allocate up to $146 billion for AI-related capital expenditures in its 2026 fiscal year, a figure that underlines the scale of expected infrastructure investments tied to AI growth.
Context and implications
- The planned facility would be fueled by natural gas and is designed to deliver substantial baseload power to support a data center campus in West Texas.
- The $7 billion price tag and the initial 2,500 megawatt capacity are the principal financial and technical parameters disclosed by people familiar with the talks.
- Securing dedicated electricity supply is an operational priority for firms building data center capacity for AI workloads.
Market sectors affected
- Energy - gas-fired generation development and project financing.
- Technology - data center operators and cloud infrastructure driven by AI demand.
What is uncertain
- Final agreement status - the companies are described as in exclusive talks, but no completed deal has been announced.
- Project execution details - timelines, permitting, and construction milestones were not provided and remain unspecified.
Details in this report are based on individuals familiar with the discussions. No binding agreements were reported in the information provided.