Editor’s Note: This story has been updated to include a statement from Microsoft.

Microsoft Corp (NASDAQ:MSFT) has reportedly entered an exclusivity agreement with  Chevron (NYSE:CVX) and Engine No. 1.

AI Boom Drives Urgent Need For Power

In a statement to Benzinga, the three companies said that no definitive agreement or commercial terms have been finalized yet.

The Satya Nadella-led tech giant is working on securing a dedicated electricity supply chain to meet the surging demand from AI workloads.

Companies like Microsoft have increasingly been on the lookout for reliable energy sources to support data centers powering AI platforms like Copilot and ChatGPT.

$7 Billion Texas Project At The Center

The discussions are tied to a proposed natural gas-fired power plant in West Texas, with a reported value of around $7 billion. Initially, the facility could generate approximately 2,500 megawatts of electricity, Bloomberg reported, citing people familiar with the matter.

Microsoft, Chevron and Engine No. 1 did not immediately respond to Benzinga's request for comments.

Last year, Chevron and Engine No. 1 announced plans to build power plants next to data centers. The companies planned to use turbines from GE Vernova Inc (NYSE:GEV).

Last week, it was also reported that Microsoft has decided to lease a 700-megawatt data center in Texas. This center was originally for OpenAI and Oracle Corp (NYSE:ORCL).

Price Action: On Tuesday, Microsoft shares closed at $370.17, up 3.12%. It gained 0.76% to $373.00 in after-hours trading. Meanwhile, Chevron shares closed at $206.90 on during the regular trading hours, down 1.81% and fell another 0.92% to $205 in after-hours trading, according to Benzinga Pro.

Benzinga Edge Stock Rankings show that MSFT is in a downtrend across the short, medium and long term, while maintaining a strong Quality score in the 94th percentile.

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