This article first appeared on GuruFocus.
Analysts and investors are reassessing the outlook for Fermi Inc. (NASDAQ:FRMI) after the power developer disclosed that a key tenant terminated a funding agreement tied to its proposed artificial intelligence campus in West Texas. According to a filing, the first investment-grade tenant canceled a Nov. 4 agreement that could have provided up to $150 million to fund construction costs, with no capital drawn before the termination. The news triggered a sharp market reaction, with shares sliding as much as 46% on Friday, extending a decline that has seen the company lose more than two-thirds of its market value since October, despite not yet generating revenue.
The development has reinforced growing skepticism around the AI-power trade, particularly whether developers can translate early interest into binding, long-term contracts. Fermi had been one of the most closely watched names in the sector, supported by ambitions to build what it has described as the world’s largest private grid for a data-center campus that would consume more than twice the electricity used by New York City. Recent weakness across the space suggests investors are increasingly focused on financing risk and the possibility that capacity additions may be running ahead of confirmed demand, prompting a more selective view of which projects could ultimately move forward.
Fermi said negotiations are continuing around a separate lease agreement tied to a letter of intent signed in September, although the exclusivity provision linked to that agreement expired on Dec. 9. Since then, the company has begun discussions with several other potential electricity customers and said it remains on track to begin power delivery in 2026. The company plans to build four large nuclear reactors and has compared the race to supply power for AI infrastructure to the Manhattan Project, even as competition intensifies from established power developers and private equity-backed groups targeting the same technology customers.