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Microsoft and Chevron Team Up on Texas Power Strategy for Major AI Datacenter Expansion

• By John K. Waters
• 06/22/2026

Microsoft is moving ahead with one of its largest data center expansions to date, combining a new 2-gigawatt AI-focused campus in Pecos, Texas, with a long-term power agreement from Chevron to secure dedicated energy capacity for future AI workloads.

The announcements, made separately by Microsoft and Chevron, underscore a growing reality for the AI industry: access to reliable power is becoming as strategically important as access to computing hardware.

According to Microsoft, the Pecos campus will add approximately 2 gigawatts of datacenter capacity to the company's global infrastructure footprint and represents a multibillion-dollar investment over the next five to seven years.

"Today, Microsoft is announcing one of the largest single capacity additions in our history," wrote Noelle Walsh, Microsoft's president of Cloud Operations and Innovation. "In Pecos, Texas, we will build a new datacenter campus, expanding our global datacenter capacity by approximately 2 gigawatts (GW) to meet strong and sustained customer demand for AI and cloud services across industries and regions."

Microsoft said the project is expected to create more than 6,000 construction jobs during peak development and support hundreds of permanent operations positions in West Texas. The company also emphasized that the facility is being designed around a dedicated onsite energy strategy rather than relying exclusively on regional grid capacity.

"By pairing new datacenter infrastructure with dedicated energy supply located onsite, we can bring capacity online at the pace our customers require while maintaining operational reliability," Walsh wrote. "Critically, the energy infrastructure required to power this datacenter is being funded by Microsoft."

Chevron will provide power through Project Kilby, an energy development in West Texas being built by Energy Forge One, Chevron's wholly owned subsidiary. Under a 20-year agreement, the project will deliver dedicated electricity directly to Microsoft's datacenter operations.

The project has also drawn scrutiny from environmental and tax-policy watchdogs over its reliance on natural gas and its use of tax incentives for AI data center infrastructure. Critics have argued that large AI facilities could increase emissions and benefit from public incentives without delivering proportional benefits to local communities.

Jeff Gustavson, president of Chevron New Energies, said the agreement reflects a broader shift as technology companies and energy providers work together to support the growth of AI-driven infrastructure.

"Our agreement with Microsoft through Project Kilby represents Chevron's unique ability to deliver power to AI customers with certainty, speed, and at a competitive cost, leveraging Permian natural gas supply, infrastructure, and our proven execution capabilities," Gustavson said.

Walsh said traditional infrastructure planning models are being tested by the pace of AI adoption.

"Customer demand for AI and cloud services continues to grow rapidly," she wrote. "Meeting this demand requires not only more datacenter capacity, but capacity that's predictable, resilient, and able to scale quickly."

The Pecos campus will initially be powered by a co-located natural gas facility capable of supplying electricity independently of the public grid. Microsoft said the datacenter and supporting energy infrastructure could eventually connect to the broader regional system.

The project highlights a broader trend emerging across the AI sector. As hyperscale providers race to build new datacenters, power procurement is becoming a central element of infrastructure strategy. Rather than treating energy as a utility purchased after facilities are built, companies are increasingly securing long-term, dedicated power sources as part of the datacenter planning process itself.

For Microsoft, the Pecos investment is not only an expansion of cloud capacity. It's also a signal that in the AI era, energy infrastructure is becoming a competitive asset in its own right.