The S&P 500’s newest addition may be a relic of the Wild West, but its soaring valuation is a byproduct of AI explodes. Founded in 1888, Texas Pacific Land Corporation is a company with only 100 employees but a market capitalization of more than $35 billion. For comparison, American Airlinesbased in nearby Fort Worth, employs more than 100,000 people and is worth about $10 billion.
Texas Pacific Land Corporation, or TPL, started out as a corporation land trust but found itself sitting on “black gold” soon after oil was discovered in West Texas in the early 1900s. More recently, the company began exploring other ways to monetize its 873,000 acres, a larger area than Yosemite National Park. Bet that area inexpensive natural gas will attract US tech giants, TPL is attracting renewable energy projects, bitcoin mineand utility-scale battery manufacturing.
Then there’s the possibility data centerThis has helped TPL nearly triple its stock price over the past year. It remains to be seen whether the hubs will become a fixture of Permian Basin like an oil pump, but not lacking investor hype for companies that can capitalize on the burst of energy needed to fuel the AI revolution.
“TPL has many positive attributes for data centers, and no one has more land than we do in West Texas,” CEO Tyler Glover said during the company’s earnings call earlier this month .
The company declined to provide further comment for one Bloomberg report about its data ambitions, but Glover said on the earnings call that he believes TPL is well positioned to meet demand for land and water services as artificial intelligence opportunities open up.
“If we need to buy more land to build a data center, we have proven that it is not difficult to do,” he said. “I think there are other places in the country that are also attractive for data centers, so we’re working to make TPL as attractive as possible.”
Why Big Tech might need West Texas natural gas
The bullish sentiment surrounding TPL’s data ambitions is unsurprising given how Big Tech works CapEx ship doesn’t seem to be slowing down anytime soon. According to data from Bloomberg intelligenceGoogle-parents Alphabet, Microsoft, Amazonand Meta, Facebook’s parent company, could spend a total of more than $200 billion next year amid the AI arms race. That means data center energy demand in the US could increase about 160% by 2030, according to ARRIVE Goldman Sachsaccounts for nearly 1/10 of the country’s energy use.
“Such a surge in electricity demand has not been seen in the United States since the early years of this century,” the bank’s report said.
This has motivated many concern about carbon emissions and investors have joined the tech giants in trying to think ahead. With Big Tech starting to sign deals for nuclear energyThe ten best-performing companies in the S&P 500 this year include providers such as vistra (first), GE Vernova (fourth) and Constellation energy (ninth), each Slickchart.
Demand for natural gasoften dubbed “the world’s cleanest fossil fuel,” also seems set to skyrocket. It’s cheapest in West Texas, where it is available excess supply has sent prices at Waha Hub near the Permian Basin going negative dozens of times this year.
Managing overproduction is not a problem for TPL, which has raked in nearly $100 million in oil and gas royalties last quarter from like ExxonMobil, ChevronAnd ConocoPhillips while not paying anything to operate the actual wells. It’s no surprise that investors also flocked to Landbridge, the West Texas landowner that has seen its shares more than triple since its IPO in June.
However, Landbridge’s footprint in the Permian Basin is less than one-third that of TPL. The company’s shares jumped 14% on Friday after the announcement that TPL would replace it Marathon Oilwas acquired by ConocoPhillips, in the S&P 500. (TPL shares gave up most of that gain earlier this week, with shares down more than 10% and trading around the $1,550 mark.)
On a broader level, TPL’s newfound data ambitions underscore the company’s remarkable evolution from a land-selling vehicle created to repay bondholders after the Texas and Texas bankruptcies. Pacific Railway Co., which unsuccessfully attempted to connect East Texas and San Diego. Over time, the company was traded on the New York Stock Exchange in 1927 and thanks to its lean operations and stock buybacks, it became a favorite of young people. Warren Buffett.
Today, unlike the Oracle of Omaha’s overriding value thesis, many TPL shareholders are seeking outsized growth.
