How Natural Gas is Powering the AI Boom

Has Chevron [CVX] become an artificial intelligence (AI) play? 

On November 12, the US oil major announced it is to build a power station in West Texas, to provide energy to an AI data center for an as-yet-unnamed “premier customer”.

“Negotiations are progressing at pace,” CFO Eimear Bonner said at the firm’s investor day. “Chevron is uniquely positioned to deliver a very competitive project in this space with attractive returns that underscored US energy abundance and positions us to power American AI growth.”

Set to come online in 2027, the installation will be able to generate 2.5GW of off-grid power, Seeking Alphareported, equivalent to what would be needed to power some 2 million homes.

One notable aspect of this project is that it will be fueled by natural gas.

The energy source is having a moment right now. As Sherwood News recently outlined, Expand Energy [EXE], a natural gas stock, in Q3 saw the fastest year-over-year sales growth in the S&P 500. Formed out of last year’s merger of Chesapeake and Southwestern, Expand is the US’ largest natural gas producer.

Four other natural gas firms — namely pipeline and processing company ONEOK [OKE]; distributor EQT [EQT]; and the drillers Diamondback Energy [FANG] and Coterra Energy [CTRA] — were also in the top 25, rubbing shoulders with the likes of Palantir [PLTR], Coinbase [COIN] and Advanced Micro Devices [AMD].

What’s behind this growth?

“An early US cold snap, strong liquefied natural gas exports from the US to Europe and doubts about Russian supplies to the world market amid more talk of sanctions and Ukrainian attacks on Russian infrastructure,” are all contributing factors, Sherwood noted. 

However, above and beyond those shorter-term factors, the narrative is one of an exponential spike in energy demand, largely driven by the needs of AI. This is the tendency that Chevron is looking to plug into. 

Let’s unpack what makes natural gas well-suited to meeting a large portion of that soaring demand. First: a primer.

What is Natural Gas?

Natural gas is a fossil fuel formed over millions of years from the decomposed remains of plants and microorganisms buried deep beneath the Earth’s surface. 

Composed mainly of methane, it’s found in underground rock formations and is extracted through drilling, often alongside oil. Once processed to remove impurities, natural gas becomes a versatile energy source used for heating homes, generating electricity and powering industrial processes. It’s also a key feedstock for producing chemicals, fertilizers and hydrogen. 

Compared with coal and oil, natural gas burns more cleanly, emitting less carbon dioxide and fewer pollutants, which has helped position it as a “bridge fuel” in the transition toward lower-carbon energy systems. 

“When paired with carbon capture, it offers a pragmatic path towards near-term security and decarbonization — particularly in regions with established infrastructure,” according to the World Economic Forum’s ‘Fostering Effective Energy Transition 2025’ report.

However, methane leaks during extraction and transport can offset these environmental advantages, since methane is a potent greenhouse gas. 

Natural Gas and AI

In a recent interview with Bloomberg, EQT CEO Toby Rice said he thinks that AI infrastructure requirements will prompt a 20–40% spike in natural gas demand in the US.

Indeed, global gas demand climbed by 78 billion cubic meters in 2024, partly fueled by the surge in AI-driven data centers, according to data in the latest Global Gas Report, published by the International Gas Union and infrastructure operator Snam, which forecasts a similar increase in 2025. According to the IEA, natural gas accounted for 21.8% of the global power generation mix in 2024, behind only renewables, at 32.1%, and coal, at 34.5%. 

Natural gas is well-placed to address AI’s exploding energy needs because it offers reliable, flexible power at scale. AI data centers run 24/7 and require constant, high-density electricity, something intermittent renewables can’t consistently provide without large storage systems. Gas-fired plants can ramp output up or down quickly, matching the spiky loads created by AI training cycles. 

All of this is good news for stocks with a stake in the sector. Here goes a quick overview of the three natural gas stocks that saw the fastest sales growth in Q3.

Gas Giants: EXE vs OKE vs EQT

Expand Energy is a large US natural-gas producer with a focus on low-cost, scalable output and an emphasis on operational efficiency. Management pitches it as a growth-and-yield business that leverages core onshore basins to generate steady cash flow and fund modest reinvestment, keeping the balance sheet manageable while returning capital to shareholders.

ONEOK is a midstream infrastructure operator that transports, fractionates and stores natural gas and natural gas liquids across the US. Its value lies in fee-based contracts, long pipelines and terminal assets that generate predictable cash flow and dividends, with growth tied to throughput and export demand rather than commodity prices. It’s a play on durable cash flow and network scale.

EQT Corporation is a vertically integrated natural-gas producer with large positions in the Appalachian Basin and sizeable midstream holdings. The company emphasizes being a low-cost operator with inventory of high-margin drilling locations, an investment-grade focus on the balance sheet and operational integration that smooths volatility in commodity cycles.

Source: Yahoo Finance

All three sit in the gas complex but play different roles: Expand is upstream production and levered to gas prices and drilling economics; ONEOK is midstream, earning fees from moving and processing volumes; EQT mixes upstream scale with midstream control, aiming for cost advantage and margin capture. 

Their fundamentals vary. Expand’s metric set centers on reserves, production growth and capex, ONEOK’s on throughput, contract tenor and EBITDA per barrel of oil equivalent, while EQT’s blends reserves, unit costs and midstream EBITDA. 

On AI demand specifically, all could indirectly benefit: AI data centers expand baseload power and industrial demand for gas-fired generation and for LNG exports that use pipeline supply (supporting EXE and EQT volumes), while higher, steadier flows underpin OKE’s fee revenue and utilization of pipelines and fractionators. 

EQT’s integrated model can capture both commodity upside and transport margin; OKE benefits from higher throughput without commodity exposure; EXE gains from price and volume tailwinds. Overall, investors should weigh commodity cyclicality and capital allocation at producers versus the fee-driven stability and infrastructure reinvestment needs of midstream operators. 

Investing in Natural Gas: What to be Aware of

Natural gas offers strong demand fundamentals, flexible generation and potential growth from industrial expansion and AI-driven data centers, but investors need to weigh risks carefully. 

Prices are volatile, influenced by weather, storage levels and geopolitical factors, meaning upstream producers like EXE and EQT face earnings swings. Midstream operators such as OKE are more insulated, earning fee-based revenue, but their growth depends on volumes and infrastructure utilization. Regulatory shifts, carbon policies and methane emissions scrutiny can impact costs and operations across the sector. 

Capital allocation is another factor to bear in mind. High leverage or aggressive expansion can magnify returns or losses. 

Liquidity, dividend sustainability and hedging practices are critical for income-focused investors.

Finally, the energy transition could pressure fossil-fuel valuations over the long term.

Conclusion

Natural gas remains a strategically important energy source, offering both growth and income opportunities, particularly as AI and industrial demand expand. However, investors must navigate price volatility, regulatory risks and the broader energy transition when allocating to the sector.