Fermi stock debut highlights Wall Street enthusiasm but London remains cautious

Fermi, a new data centre real estate investment trust founded by Rick Perry, former US energy secretary, made an impressive mid-week debut on Nasdaq, yet London investors responded with hesitation. Shares opened in New York at $25, above the initial $21 guidance, closing at $32.53, marking a 55 per cent surge and securing $682.5 million for the company. However, when London markets opened, the share price started at $33 but slid by 8.7 per cent to close at $30.135, reflecting less appetite from the UK side.

Established in January, Fermi targets development of a unique Amarillo-based energy and data complex, aiming to cater to technology firms engaged in advanced artificial intelligence work. The attraction for investors stems from the increasing energy requirements for AI-driven operations, prompting a surge in interest for data centre infrastructure. Backed by plentiful natural gas supplies and surrounded by substantial pipeline networks in Texas, the company is strategically positioned to address AI computing’s power needs.

The company plans to construct a site with 1.1 gigawatts of capacity by 2026, with ambitions extending to 11 gigawatts. The power will be generated from a mix of natural gas, nuclear, and solar energy, ensuring reliability and scalability. Fermi has signed a non-binding agreement with one of the world’s five largest technology firms for a 20-year supply, supporting confidence in its business model.

Despite investor excitement in New York, several risks surround the business. The prospectus warns of execution risks across all major operations, dependence on third-party suppliers and manufacturers, and a reliance on the continued leasehold with the Texas Tech University System. Significant competition for energy equipment and a small number of initially concentrated anchor tenants may also pose challenges to revenue stability.

Fermi has yet to generate revenue and recorded a net loss of $6.4 million in the first half of the year, as stated in its prospectus. The proceeds from the successful listing are scheduled for site development and essential equipment procurement, indicating the company’s commitment to rapid expansion. A high degree of ministerial and regulatory collaboration was required to secure the dual listing, with London authorities keen to reinforce the city’s openness to pioneering and innovative companies.

While the innovative listing structure and unique business proposition attracted substantial US investment, the reserved reception in London underlines a cautious outlook among UK investors for bold, capital-intensive ventures operating at significant execution risk. The unfolding story of Fermi’s growth could be a litmus test for transatlantic market confidence in data infrastructure ventures supporting the AI revolution.