Chevron and Microsoft Partner on Landmark Texas AI Power Project

Chevron Corporation CVX and Microsoft Corporation MSFT have joined forces in a landmark partnership to develop one of the largest co-located power and data center projects in the United States. The collaboration comes as the rapid growth of artificial intelligence drives unprecedented demand for reliable electricity to support large-scale data centers. By combining Chevron’s energy expertise with Microsoft’s expanding AI and cloud infrastructure needs, the agreement underscores how energy and technology leaders are working together to power the next generation of digital innovation.A 20-Year Agreement to Power AI InfrastructureChevron's subsidiary, Energy Forge One LLC, has signed a 20-year power purchase agreement with Microsoft to develop a dedicated power facility in West Texas. The project, known as Project Kilby, will provide electricity directly to a Microsoft-operated data center campus in Pecos, TX.As AI applications such as ChatGPT, Copilot and advanced cloud services continue to expand, technology companies are increasingly seeking dependable energy sources that can scale alongside their computing needs. This agreement ensures Microsoft will have access to a large-scale, long-term power supply to support its growing AI infrastructure.Project Kilby: One of America's Largest Energy DevelopmentsProject Kilby is expected to deliver approximately 2.67 gigawatts of power capacity through a phased and modular development approach. The majority of the power generation will come from natural gas-fired facilities utilizing turbines supplied by GE Vernova Inc. GEV, while additional capacity will be provided through Caterpillar's Solar Turbines division. GEV’s natural gas turbines were intended to serve the data centers in the Southeast, Midwest and West regions of the country. GEV is a leading energy equipment manufacturer and services provider that will provide turbines in this breakthrough deal.By combining substantial power generation with a nearby data center campus, the project is designed to provide reliable and dispatchable electricity while reducing pressure on the regional power grid. Chevron, currently carrying a Zacks Rank #3 (Hold), believes the project will become one of the largest co-located natural gas power and data center developments in the country.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Leveraging America's Natural Gas AdvantageChevron views the project as a strategic opportunity to capitalize on growing energy demand from the AI sector. The company plans to leverage abundant Permian Basin natural gas resources and its extensive project execution experience to deliver power quickly and cost-effectively.For Chevron, Project Kilby represents more than just an energy investment. The company expects the project to generate diversified revenue streams that are less dependent on oil and gas commodity price fluctuations. Management has indicated that the project is targeting mid-teen returns, reinforcing its potential to create long-term shareholder value.Economic Benefits for West TexasBeyond supporting digital infrastructure, Project Kilby is expected to generate substantial economic benefits for Texas. Chevron estimates that the development could contribute more than $10 billion in state and local tax revenues while supporting nearly 2,000 jobs.Microsoft's related data center expansion is also expected to create more than 6,000 construction jobs over the next five to seven years, along with hundreds of permanent operational positions. Together, these investments could significantly strengthen the regional economy and establish West Texas as an important hub for AI-driven development.Environmental and Operational Considerations by CVXChevron has emphasized efforts to minimize the project's environmental impact. The facility plans to use non-potable brackish groundwater rather than freshwater for power plant operations. The company is also exploring opportunities to reuse produced water from oil and gas operations.In addition, the project will incorporate advanced emissions-control technologies, including Selective Catalytic Reduction systems designed to lower nitrogen oxide emissions. Measures to reduce noise and light impacts on surrounding communities are also planned.Way Ahead for Project KilbyProject Kilby represents a major milestone at the intersection of energy and technology. With first power expected in 2028 and a final investment decision anticipated by the end of 2026, the development underscores how AI is reshaping energy demand across the United States.As technology companies race to expand computing capacity, partnerships like the one between Chevron and Microsoft could become increasingly common. By combining reliable natural gas power with large-scale data center infrastructure, Project Kilby aims to support the future of AI while delivering economic value for both companies and the communities they serve.Research Chief Names "Single Best Pick to Double"From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. 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