<p><strong>Chevron</strong> <span class="ticker-mention inline-flex items-center font-bold">(CVX <span class="ml-1 text-green-900">+0.70%</span>)</span> has signed a 20-year power agreement with <strong>Microsoft</strong> <span class="ticker-mention inline-flex items-center font-bold">(MSFT <span class="ml-1 text-red-900">2.45%</span>)</span> to support a massive AI data center project in Texas. The deal paves the way for the energy giant to build a large-scale natural gas-fired power plant to support the Microsoft facility. Known as Project Kilby, it will be one of the largest co-located gas power and data center projects in the country.</p><p>Here’s a look at Project Kilby and what it means for the energy stock.</p>

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<img alt="An energy facility with a rising chart in the background." width="880" height="590" class="h-auto max-w-full rounded object-contain" src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2Nkbi5jb250ZW50LmZvb2xjZG4uY29tL2ltYWdlcy8xdW1uOXFlaC9wcm9kdWN0aW9uLzEzMmVhZDE2YjUzMDkwODEzNWVmYzVmZDgyMjU2YWNlNTUxNTFjODgtMTIwMHg4MDQuanBnP3c9MTIwMCZoPTgwNCZxPTc1JmF1dG89Zm9ybWF0Jnc9Mzg0MA?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2Nkbi5jb250ZW50LmZvb2xjZG4uY29tL2ltYWdlcy8xdW1uOXFlaC9wcm9kdWN0aW9uLzEzMmVhZDE2YjUzMDkwODEzNWVmYzVmZDgyMjU2YWNlNTUxNTFjODgtMTIwMHg4MDQuanBnP3c9MTIwMCZoPTgwNCZxPTc1JmF1dG89Zm9ybWF0Jnc9Mzg0MA"/>
<p style="color: #666">Image source: Getty Images. </p>
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</div><h2 id="a-massive-bet-on-ai-power">A massive bet on AI power</h2><p>It’s no secret that AI data centers consume a lot of power. U.S. data center power demand is on track to double to 77 gigawatts (GW) by 2030, according to BloombergNEF. As a result, AI leaders such as Microsoft are locking up power sources to support their AI growth strategies. </p><p>Project Kilby will deliver about 2.67 GW of capacity upon completion. For perspective, that's enough to power around 2 million homes. Chevron, and its partner, Engine No. 1, would build the capacity through a phased, modular approach to supply incremental power over time as Microsoft needs additional energy for its data center campus. Chevron expects to make a formal Final Investment Decision (FID) on the project, which could cost around $7 billion, by the end of this year, putting it on track to start supplying power by 2028, with the full build-out continuing into the 2030s. <strong>GE Vernova</strong> would supply most of the gas turbines and associated electrical infrastructure, while <strong>Caterpillar</strong> subsidiary Solar Turbines would provide additional capacity. </p><section><div class="flex flex-wrap place-content-between"><div class="flex w-full place-items-center lg:w-3/4"><div class="p-[8px] text-center" style="width: 95px"><small><div class="flex flex-col items-center gap-2">Expand</div></small></div><div class="py-4 pr-4"><img alt="Chevron Stock Quote" width="64" height="64" class="w-full flex-none object-contain" src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vYXJ0L2NvbXBhbnlsb2dvcy9tYXJrL0NWWC5wbmcmdz0xMjg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vYXJ0L2NvbXBhbnlsb2dvcy9tYXJrL0NWWC5wbmcmdz0xMjg"/></div><div class="pr-[16px]"><h2>NYSE: CVX</h2><div class="text-md leading-[1] font-medium text-gray-800">Chevron</div></div></div><div class="flex w-full place-items-center lg:w-1/4"><div class="h-full w-5/6 px-4 py-2.5 lg:text-right bg-green-200"><div class="mb-[2px] text-[10px] text-gray-800">Today's Change</div><div class="mb-6 text-[18px] leading-none font-medium text-green-900">(0.70%) $1.22</div><div class="mb-[2px] text-[10px] text-gray-800">Current Price</div><div class="text-gray-1100 text-[18px] leading-none font-medium">$174.85</div></div><div class="flex h-full w-1/6 items-center justify-center py-2.5 bg-green-900"></div></div></div><div class="flex flex-wrap overflow-hidden transition-all duration-300 h-0"><div class="w-full border-t border-gray-300 p-2 lg:w-3/4 lg:border-r lg:p-6"></div><div class="w-full p-2 lg:w-1/4 lg:p-4"><h3>Key Data Points</h3><div class="text-gray-1100 my-[14px] grid grid-cols-2 text-sm"><div class="border-b border-gray-300 py-[14px] text-gray-800">Market Cap</div><div class="border-b border-gray-300 py-[14px] text-right font-bold">$346B</div><div class="border-b border-gray-300 py-[14px] text-gray-800">Day's Range</div><div class="border-b border-gray-300 py-[14px] text-right font-bold">$172.87 - $175.44</div><div class="border-b border-gray-300 py-[14px] text-gray-800">52wk Range</div><div class="border-b border-gray-300 py-[14px] text-right font-bold">$142.40 - $214.71</div><div class="border-b border-gray-300 py-[14px] text-gray-800">Volume</div><div class="border-b border-gray-300 py-[14px] text-right font-bold">259K</div><div class="border-b border-gray-300 py-[14px] text-gray-800">Avg Vol</div><div class="border-b border-gray-300 py-[14px] text-right font-bold">11.1M</div><div class="border-b border-gray-300 py-[14px] text-gray-800">Gross Margin</div><div class="border-b border-gray-300 py-[14px] text-right font-bold">15.15%</div><div class="border-b border-gray-300 py-[14px] text-gray-800">Dividend Yield</div><div class="border-b border-gray-300 py-[14px] text-right font-bold">4.02%</div></div></div></div></section><p>Co-locating a new, large-scale power generation facility with the data center will enable Microsoft to obtain the reliable electricity needed to support the advanced compute requirements of its AI and cloud operations. It will also reduce the impact on the regional power grid. </p><h2 id="a-powerful-new-growth-platform">A powerful new growth platform</h2><p>Developing gas-fired power plants is a new business platform for Chevron. It will enable the global energy giant to leverage its natural gas resources in the Permian Basin and expertise in executing large-scale capital projects. </p><div class="my-8 lg:hidden"><div id="foolcom_sidebar_top_container" class="pitch-container"><div><div class="min-h-[350px] rounded border border-gray-200 bg-white p-4 shadow-sm"><div class="mb-3 h-4 w-2/3 rounded bg-gray-200"></div><div class="mb-2 h-3 w-full rounded bg-gray-100"></div><div class="h-3 w-5/6 rounded bg-gray-100"></div></div></div><div></div></div></div><p>Chevron would supply the facility with locally produced gas from its vast Permian Basin resource base. By converting the gas to electricity, Chevron will generate more predictable cash flow backed by the 20-year power supply contract with Microsoft. That will help reduce some of the commodity price volatility of its oil and gas operations, further supporting resilient shareholder returns, including continued dividend increases. The company expects to generate a mid-teens return on its investment. </p><div class="mb-8 flex justify-center"></div><p>Project Kilby is likely the first of many gas-fired power projects Chevron will develop in the coming years to support AI data centers. When the energy giant formed its partnership with Engine No. 1 early last year, it aimed to deliver up to 4 GW of projects, with the potential to expand beyond that capacity. Given the massive power needs of AI data centers, it should have plenty of opportunities to develop additional projects in the future. </p><h2 id="adding-to-chevrons-investment-appeal">Adding to Chevron’s investment appeal</h2><p>Chevron’s power deal with Microsoft offers two major benefits. It will enable the energy giant to generate predictable cash flows over the life of the 20-year contract, reducing some commodity price volatility. It also provides the company with a new growth engine as it could build more gas-fired power plants in the future to support AI energy demand. Those features make Chevron look even more appealing as a long-term investment.</p><div id="article_pitch_container" class="pitch-container"><div><div class="mb-32px p-24px min-h-[1000px] bg-gray-100 md:min-h-[560px]"><div class="mb-8px h-10 w-60 rounded bg-gray-200"></div><div class="mb-16px h-8 w-48 rounded bg-gray-200"></div><div class="mb-2 h-4 w-full rounded bg-gray-200"></div><div class="mb-2 h-4 w-5/6 rounded bg-gray-200"></div><div class="mb-2 h-4 w-4/6 rounded bg-gray-200"></div><div class="mt-16px h-12 w-44 rounded bg-gray-300"></div><div class="mt-20px h-3 w-3/4 rounded bg-gray-200"></div></div></div><div></div></div><div id="promobox_container" class="pitch-container"><div><div class="min-h-[570px] rounded border border-gray-200 bg-gray-100 p-4 md:min-h-[350px]"><div class="mb-3 h-4 w-2/3 rounded bg-gray-200"></div><div class="mb-2 h-3 w-full rounded bg-gray-100"></div><div class="mb-2 h-3 w-5/6 rounded bg-gray-100"></div><div class="mt-6 h-28 w-full rounded bg-gray-200"></div></div></div><div></div></div>

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<p>Chevron signed a 20-year power agreement with Microsoft to build a massive natural gas-fired power plant, Project Kilby, in Texas. This $7 billion facility will supply 2.67 GW of capacity to support Microsoft's AI data center, aiming for operation by 2028. The deal provides Chevron with predictable cash flows, reduces commodity volatility, and establishes a new growth platform leveraging Permian Basin resources to meet surging AI energy demand.</p>

- Chevron has signed a 20-year power agreement with Microsoft for Project Kilby, which involves a large-scale natural gas-fired power plant in Texas to support AI data center operations.  
- The project aims to deliver approximately 2.67 GW of capacity, sufficient to power around 2 million homes, and is expected to begin supplying power by 2028 with a total investment of around $7 billion.  
- This initiative positions Chevron to leverage its natural gas resources and reduce commodity price volatility, enhancing its long-term investment appeal while potentially leading to further gas-fired power projects.

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Chevron is Building a Massive Power Plant to Support a Microsoft AI Data Center. Here's What it Means for the Energy Stock.