Energy IPOs jump as AI spending spills beyond Big Tech

As doubts grow over whether hyperscalers can turn massive AI spending into profits, investors are increasingly looking for other ways to ride the boom — including energy companies tied to data center demand.

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Fervo chief executive Tim Latimer said the company and its investors see public markets as a way to grow faster. Fervo raised more than $2 billion when it went public in May.

But the early performance of many of these offerings has been weak. According to Dealogic, nearly two-thirds of the energy companies that floated this year and last are now trading below their offer price. Across all sectors, by comparison, less than 40 percent of IPOs are underwater.

Several recent listings have fallen sharply:

• X-energy, backed by Amazon and focused on small modular nuclear reactors, went public in April and now trades 33 percent below its $23 offer price.
• ERock, a gas generator maker, has lost 42 percent since its IPO in June.
• Fermi, a data center energy company, is down 68 percent since coming to market in September.
• Deep Fission, which is designing nuclear reactors to be buried in one-mile underground holes, raised $40 million in June, a 73 percent cut from its initial target. Its shares are down 33 percent from their Wall Street debut.

Brian Kessens, senior portfolio manager at energy-focused fund firm Tortoise Capital, said some traders are buying IPOs only to sell quickly and then move into the next deal. He said banks need to set reasonable valuations and be more careful about allocating shares to investors likely to flip them.

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“If you think that an IPO is going to go really well, then it’s in some sense free money.”

Some of the companies now on the market, including X-energy and Deep Fission, are pursuing technologies that critics say have yet to prove they are technically or commercially viable. Jeff Osborne, a sustainability and energy transition analyst at TD Cowen, said the companies holding up better tend to have “a real business now” and are “less of a science experiment.”