Fermi (FRMI) shares jumped 23% to $7.24 on Tuesday after the data center developer announced its first major tenant for Project Matador, its flagship campus in Amarillo, Texas. The company disclosed a 15-year lease agreement with AI cloud provider TensorWave, expected to generate approximately $6.5 billion in revenue over the term.
Under the agreement, Fermi will develop, construct, and deliver data centers for TensorWave, with occupancy scheduled to begin in phases starting in the second half of 2027. The lease includes expansion rights for two additional data centers, which could increase the partnership's total capacity to more than 650 megawatts if fully exercised.
Project Matador validation
The deal marks a significant milestone for Fermi, which had spent months searching for an anchor tenant for its 7,570-acre Texas campus. Chairman Marius Haas called the agreement a key achievement, noting that it fulfills the company's most important objective shared with the market in May. The lease validates Fermi's long-term strategy to develop Project Matador into what it aims to be the world's largest data center complex.
The announcement comes after a challenging period for the company. Fermi had struggled to secure a tenant, contributing to tensions with former CEO Toby Neugebauer, who was dismissed in April. The new lease provides a much-needed catalyst for the stock, which had been under pressure due to execution concerns.
Analyst reactions and risks
While investors welcomed the news, analysts remain cautious about Fermi's broader ambitions. Seeking Alpha noted that the company remains a speculative play despite the rally, highlighting significant construction, financing, and execution risks associated with its planned 17-gigawatt Texas campus and nuclear-powered infrastructure strategy. The initial lease is relatively modest compared with Fermi's overall goals, but securing a first customer demonstrates its ability to win commercial contracts.
Mizuho reiterated its Outperform rating and maintained an $11 price target, describing the lease as a long-awaited catalyst. The brokerage had previously projected 500 megawatts operational in 2027 and another 500 megawatts in 2028. The 222-megawatt TensorWave agreement aligns with those expectations and provides greater visibility into Fermi's development timeline.
With Mizuho's price target implying further upside, some traders are likely to keep tracking FRMI through trading platforms in the weeks ahead. The expansion rights included in the agreement could significantly increase the partnership's scale if exercised, offering additional upside potential.
For context, other recent market moves include SpaceX's post-earnings rally and Eli Lilly's strong quarter, highlighting the diverse catalysts driving stock movements. Meanwhile, Nvidia's AI chip momentum continues to influence the broader tech sector.
This article is for informational purposes only and does not constitute financial advice.
