Geothermal startup Fervo Energy surges 33% in IPO debut on AI data center demand

Fervo Energy, a geothermal startup riding a wave of demand from AI data centers hungry for reliable power, rocketed 33% in its stock market debut on Wednesday, pushing its valuation past $10 billion. The strong public reception underscores how the race to secure electricity for artificial intelligence is reshaping the energy sector.

The company had already raised $1.89 billion in an upsized initial public offering on Wednesday, initially valuing Fervo at roughly $7.6 billion. Investor appetite proved so voracious that Fervo and its bankers expanded the offering multiple times, adding 14.6 million shares and lifting the price range twice before settling at $27 per share. When trading opened on the Nasdaq under the ticker FRVO, shares surged another third.

“We were asked a few times on the roadshow, ‘Why aren’t you raising more money?'” said Sarah Jewett, Fervo’s senior vice president of strategy. “As we saw the demand come in, there were just enough signals pointing towards upsize being not only within the realm of possibility, but the realm of the encouraged.”

Fervo is the second energy company to get a warm welcome from public markets in recent weeks, following nuclear startup X-energy, which raised $1 billion in its own upsized IPO. Both are benefiting from a surge in demand from data centers and AI companies desperate to secure power for their facilities.

While geothermal energy,tapping the Earth’s heat for electricity,has existed for decades, Fervo belongs to a new wave of startups pioneering enhanced geothermal systems. The company drills deeper to reach hotter rocks and uses directional drilling techniques borrowed from the oil and gas industry to maximize output from promising geothermal fields.

“We’re repeating the playbook from the shale energy industry but with the answer key,” Jewett said.

The IPO netted Fervo $500 million more than it originally anticipated, giving it a substantial cash cushion. That capital will help fund development of its Cape Station power plant in Utah, which is scheduled to begin operations this year. The company expects the first phase of Cape Station to generate 500 megawatts when complete in roughly three years.

That 500-megawatt target was set by the size of the grid connection Fervo secured, but the company is permitted to develop 2 gigawatts of geothermal energy at Cape Station and has applied to increase its interconnection accordingly. Even that may prove conservative. Jewett said a third-party engineer reported enough heat on site for up to 4 gigawatts of capacity.

If the interconnection size grows, that extra electricity could flow to the grid. If it doesn’t, Fervo has been fielding inquiries from companies interested in direct connections. “We’re seeing an increasing amount of behind the meter commercial interest,” Jewett said.

Fervo is earlier in development on another project, Corsac Station in Nevada, from which Google will buy 115 megawatts of electricity.

Geothermal’s appeal lies partly in its ability to provide baseload power,a consistent, 24/7 electricity source unaffected by weather. Data center operators, which prioritize high uptime, are willing to pay a premium for such reliability. That has elevated geothermal from just another clean energy contender to a favorite among tech companies and, increasingly, investors.

The Houston-based company has been working to cut costs by reducing drilling time for new wells. Fervo’s first wells took dozens of days to complete and cost more than $1,000 per foot. After drilling 14 wells, the company has slashed both drilling time and cost per foot by two-thirds.

This IPO may have been overdue, but with surging interest in energy, its timing was impeccable. Fervo announced in December that it had closed a $462 million funding round, and climate tech and energy investors almost universally anticipated its public offering. Demand from hyperscalers, coupled with data from Cape Station, suggested the company had crossed the so-called “valley of death.” With an IPO now behind it, Fervo appears firmly on the other side.