Fermi Inc. (FRMI) stock intrinsic value fair value estimate & owner earnings analysis

Fermi is building Project Matador, a planned power-and-data-center campus near Amarillo, Texas. The idea is to generate electricity on site with natural gas turbines (later possibly nuclear) and lease powered data-center space to AI computing tenants. It has not yet earned any revenue. In its first year (January to December 2025) the business consumed about $173 million of owners' cash on day-to-day operations. That figure counts share-based pay as a real cost and excludes a one-time $174 million gift of shares to charity and accounting-only fair-value charges. On top of that it spent $569 million building the campus in 2025 and another $626 million in the first half of 2026. At June 30, 2026, construction in progress stood at $1.54 billion. There is no history of earnings to anchor a value on, so this valuation rests on what the company owns, what it owes, and the one lease it has signed. What changed since our previous look: in August 2026 Fermi signed a 15-year lease with TensorWave, an AI cloud provider. It covers 222 MW of total facility power, delivered in phases from late 2027 into early 2028, and is worth about $6.5 billion of contracted revenue over the initial term, which averages roughly $430 million a year. TensorWave has an option to expand to 650 MW. The lease is binding but has not closed. It only takes effect once a guaranty from an investment-grade party, board approvals and project financing big enough to build the space are in place. The closing date has already been pushed from September 30 to October 31, 2026, to finish the guaranty. Our earlier figures were built on a different basis and are not comparable to these. Debt. At June 30, 2026, borrowings were $537 million. Most of it is equipment loans with effective rates of 12% to 17%, and the largest, a $445 million MUFG turbine warehouse loan, matures in August 2027. In July 2026 the company added $431 million of 5% convertible notes due 2031, which convert at about $9.52 a share. We treat them as debt because conversion is far from certain. Pro forma for the notes, gross debt is about $968 million against about $474 million of cash, including restricted cash and net of the capped-call cost. There are about 658 million diluted shares, counting unvested stock awards. The company's own filing says its circumstances raised substantial doubt about meeting obligations over the next year. Management concluded that its funding plans, chiefly the convertible notes and undrawn equipment lines, resolve that doubt, but it also says there is no assurance those plans succeed. Base case, $0.95 a share. The lease has not closed and its counterparty is a young, venture-funded company, so we do not credit the lease income. The previous anchor tenant walked away in December 2025 before any money changed hands, so this risk is real. Instead we value what exists. The construction work, mostly scarce large Siemens gas turbines, high-voltage equipment and site work on a site with several gigawatts already permitted, is taken at about 80% of its $1.54 billion cost, or $1.23 billion. Add $474 million of cash, subtract $968 million of debt and about $100 million of overhead until any rent could begin. That leaves roughly $640 million of equity, or about $0.95 a share. Bull case, $1.55 a share. The lease closes and phase one is delivered on the contracted schedule. We assume around $250 million a year of operating cash after running the on-site power plant, out of roughly $430 million of contracted revenue. Over 15 years from early 2028 that is worth about $2.26 billion today. Against it we set about $1.3 billion still to be spent to finish phase one, since the filings give no figure for this, so it is our estimate. That leaves about $1.0 billion of lease value. Equipment not needed for phase one is carried at about $480 million, and a modest $120 million is allowed for the powered site at the end of the term. After the same cash, debt and overhead, equity comes to about $1.0 billion, or $1.55 a share. TensorWave's expansion option, the Hillcore framework for a third-party-owned 2.6 GW plant, and the rest of the planned 17 GW campus are excluded from every case. None is contracted, and each depends on future tenants and financing. Bear case, about -$0.05 a share. The lease fails to close, which has already happened once with this company, or the tenant cannot perform. The $445 million MUFG loan then comes due in August 2027 with no revenue to refinance against. The equipment is sold at about half its cost, as forced sellers of large specialised equipment typically realise. Including the commitments still to be paid and roughly $150 million of overhead and wind-down cost, assets of about $1.24 billion including cash would cover debt of $968 million and those costs, with nothing left for shareholders. The company would owe slightly more than it is worth, by roughly $30 million. Lawsuits are not counted in any case because no amount can be estimated, but they add to this downside: a shareholder class action over the IPO, and a July 2026 suit by a former executive's consulting firm claiming more than $415 million over reclaimed founder units. The margin-of-safety price. Before any lease closes, our confidence in an earnings level is nil, because there is none. The worst plausible outcome is a forced sale of the turbines into a lender-controlled process in 2027, and with a single site, a single prospective tenant, and expensive short-dated equipment debt, the structure would not protect shareholders. The things we are most likely to be wrong about are what the equipment would really fetch, how much phase one still costs to finish, and whether TensorWave's guaranty is really investment-grade. Each could move the value by tens of cents a share in either direction. The business pays nothing during the holding period, and the wait for first rent is at least until late 2027. On today's facts there is no margin-of-safety price on value alone. Once the lease has closed with its guaranty and phase-one financing is signed, the bear outcome above largely falls away and the cases would point to value of $1.40 or more by the time rent begins in 2028. The margin-of-safety price at that point is $0.70, which leaves room for the cases to imply a 20% yearly return over the roughly two and a half years to rent commencement, even allowing for construction delays and cost overruns at a company that has never built a data center.