Energy Sector’s Strategic Shift
Oilfield service companies are reportedly making a significant strategic pivot toward powering data centers as the artificial intelligence boom creates unprecedented electricity demands. According to recent reports, fracking companies including Liberty Energy and Halliburton are leveraging their energy expertise to capture a slice of the rapidly growing AI market amid challenging conditions in their traditional oil and gas operations.
Table of Contents
- Energy Sector’s Strategic Shift
- Stock Surges and Major Investments
- Unprecedented AI Power Demand
- Emerging Bright Spot in Struggling Industry
- Infrastructure and Policy Challenges
- Substantial Capacity Expansion
- Long-term Power Solutions
- Reliability Standards Critical
- Current Financial Pressures
- Industry Outlook
Stock Surges and Major Investments
Sources indicate that Liberty Energy, co-founded by current U.S. Energy Secretary Chris Wright, saw its stock jump approximately 30% after announcing plans to more than double its power generation capacity for data centers. Similarly, Halliburton’s stock reportedly increased about 15% this month following revelations of its 20% ownership stake in VoltaGrid and partnership plans for powering data centers worldwide.
Analysts suggest other major industry players including Baker Hughes, industry leader SLB, and Solaris Energy Infrastructure are also making substantial investments in the data center power rush. The movement represents a fundamental shift for companies facing what sources describe as a “double whammy” of weak oil prices and years of declining activity despite record U.S. oil production.
Unprecedented AI Power Demand
“The demand for power and for AI is like nothing I’ve ever seen in terms of demand growth,” Halliburton chairman and CEO Jeff Miller stated during an October 21 earnings call, according to transcripts. “We also know that, not only in the U.S., but around the world [AI] is a really big opportunity set for the same level of growth.”
The report states that U.S. oil production has reached an all-time high of 13.6 million barrels per day, yet the number of frac fleets required has dropped more than 50% over six years due to improved efficiency. This efficiency gain has created excess capacity that companies are now redirecting toward data center power generation.
Emerging Bright Spot in Struggling Industry
Tom Curran, energy technology analyst with Seaport Research Partners, told Fortune that the power opportunity represents an emerging bright spot for an industry suffering through a slump. “It’s very real, it’s early, and it’s to be determined which sort of approaches and types of contracts prove to be the most competitive,” Curran said, according to the report.
Analysts suggest investors are still evaluating the risk-reward profiles of this new business niche as companies ascend the learning curve. The transition timing reportedly aligns well with the broader industry trend of electrifying oilfield operations and moving away from dirtier diesel power.
Infrastructure and Policy Challenges
Somewhat surprisingly, Liberty CEO Ron Gusek reportedly directed criticism toward Trump administration policies, particularly regarding tariffs on steel and aluminum needed for power equipment. “The secretary of energy has called the race for AI dominance our next Manhattan Project,” Gusek stated during his October 17 earnings call, according to transcripts.
Gusek argued that winning the AI race requires “access to massive amounts of new power generation capacity and associated hardware,” much of which is currently subject to tariffs. He reportedly characterized the current approach as “a path to mediocrity at best” and called for policy changes to support U.S. energy and AI dominance.
Substantial Capacity Expansion
Liberty Energy is reportedly increasing its power generation capacity from a planned 400 megawatts to more than 1 gigawatt through 2027 – enough electricity to power approximately 750,000 homes. Company executives indicated they anticipate further increases to meet growing demand, with data center customers potentially representing a higher percentage of capacity than initially expected.
According to the report, both Liberty and Halliburton are utilizing versions of reciprocating natural gas generator sets arranged sequentially at data centers. VoltaGrid, in which Halliburton holds a significant stake, recently announced a deal with Oracle to deliver 2.3 gigawatts of power for data centers.
Long-term Power Solutions
For companies seeking transitional power solutions, Liberty has reportedly partnered with nuclear power startup Oklo to eventually transition customers to small modular nuclear reactors once they become operational in approximately five years. Meanwhile, Halliburton aims to leverage its global footprint to expand power partnerships worldwide on what CEO Miller described as a “global industrial scale.”
Other oilfield service providers are pursuing different approaches, with Baker Hughes, SLB, and Solaris focusing on increasing gas turbine manufacturing for data centers. Solaris is reportedly working with xAI at its Tennessee complex, while SLB is growing its “data center solutions” business focused on cooling systems and other critical infrastructure.
Reliability Standards Critical
Seaport Research’s Curran emphasized that long-term success in the data center power market requires more than just rapid deployment. “It’s one thing to go out and put together the capex and plow it into building a fleet of these assets and deliver them, set them up, and turn them on; it’s another thing to meet the standards of 24-7 power reliability,” Curran stated, according to the report.
Current Financial Pressures
While power opportunities appear promising, current earnings reports reflect the ongoing challenges in the oil sector. Liberty reportedly posted third-quarter net income of $43 million, down 42% year on year, with quarterly revenues falling 17%. Halliburton’s net income plunged to $18 million from $571 million, although revenues only declined 2%.
Industry executives indicated that oil and gas frac activity has fallen below levels required to sustain North American oil production, with producers moderating completions amid macroeconomic uncertainty after exceeding production targets earlier in the year.
Industry Outlook
Companies are reportedly lowering 2026 capital expenditure plans, retiring equipment, cutting jobs, and implementing cost-saving measures. However, there appears to be growing optimism that the global oil glut – exacerbated by ongoing OPEC production increases – will peak in the first half of 2026, potentially allowing for an industry rebound in the latter half of next year.
Analysts suggest this sentiment, while meaning several more months of downturn, represents a potentially bullish development. “We’re finally reaching the end of what has been this long, remarkable, continued increase in U.S. oil production while we’ve had an ongoing contraction in U.S. oilfield activity,” Curran stated, according to the report. “That means, even if they want to hold oil production flat, they’re going to have to start picking up activity next year.”
Related Articles You May Find Interesting
- AWS’s AI Comeback Strategy: How Amazon Plans to Overcome Its Cloud Computing Lag
- China’s Economic Strategy: PBOC Adviser Huang Yiping on Navigating Growth and In
- Europe’s Auto Industry Faces Supply Chain Crisis as Dutch-China Chip Dispute Esc
- Rosslyn’s Integrated Ecosystem: Redefining Automotive Manufacturing in South Afr
- Meta Streamlines AI Operations with 600 Layoffs at Superintelligence Labs, Prote
References
- http://en.wikipedia.org/wiki/Fracking
- http://en.wikipedia.org/wiki/Petroleum_reservoir
- http://en.wikipedia.org/wiki/Halliburton
- http://en.wikipedia.org/wiki/Data_center
- http://en.wikipedia.org/wiki/Electricity_generation
This article aggregates information from publicly available sources. All trademarks and copyrights belong to their respective owners.
Note: Featured image is for illustrative purposes only and does not represent any specific product, service, or entity mentioned in this article.