Microsoft Corporation (NASDAQ:MSFT) shares are in the spotlight Tuesday after the company announced a 20-year power purchase agreement with Chevron Corporation (NYSE:CVX) for a co-located natural gas power facility in West Texas — one of the largest dedicated power and data center developments in U.S. history.
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The Deal
Under the agreement, Chevron’s wholly owned subsidiary Energy Forge One LLC will develop Project Kilby—a co-located power facility expected to deliver approximately 2.67 gigawatts of capacity to a Microsoft-operated data center through a phased, modular approach. A majority of the generation will come from large GE Vernova turbines, with additional capacity provided by Solar Turbines, a subsidiary of Caterpillar. First power delivery is anticipated in 2028, subject to Chevron’s Final Investment Decision expected by the end of 2026.
Why It Matters
The deal reflects the extraordinary scale of energy infrastructure required to support Microsoft’s AI and cloud growth. By co-locating power generation directly with the data center, Project Kilby is designed to deliver reliable, dispatchable electricity while aiming to minimize impacts on the regional grid. The 2.67 GW capacity positions Kilby among the largest co-located natural gas power and data center developments in the United States.
“The rapid growth we’re experiencing in AI and cloud, driven by customer demand, requires energy infrastructure that can scale quickly and reliably,” said Noelle Walsh, Microsoft President of Cloud Operations + Innovation. “Our agreement with Chevron helps ensure we’ll have dedicated, large-scale power to support the evolution and reliability of advanced compute.”‘
The Bigger Picture
The Kilby agreement adds to a growing wave of hyperscaler energy deals as Microsoft, Amazon, Google, and Meta race to secure dedicated power capacity for their AI buildouts. Big Tech’s combined capital expenditure commitments for AI infrastructure are expected to exceed $700 billion in 2026, with reliable energy supply emerging as the critical bottleneck.
The West Texas location leverages Permian Basin natural gas supply, giving the project a cost and speed advantage. Project Kilby is also expected to generate more than $10 billion in state and local tax revenue and support nearly 2,000 jobs in the region.
Microsoft Shares Edge Higher
MSFT Price Action: At the time of publication, Microsoft shares are trading 1.43% higher at $372.61, according to data from Benzinga Pro.
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