Fervo Energy, the geothermal energy startup, achieved a market valuation exceeding $10 billion during its initial public offering, a surge fueled by the demand for AI data centers — and the energy necessary to operate them.

On Wednesday, Fervo raised $1.89 billion in an expanded initial public offering, initially placing its valuation at around $7.6 billion. The interest in Fervo shares was so pronounced that the company and its underwriters increased the offering multiple times, selling an extra 14.6 million shares while adjusting the price range upward twice, ultimately arriving at $27 per share.

The stock, trading under FRVO on the Nasdaq, surged another 33% at the start of trading on Wednesday, pushing its valuation above $10 billion.

“We were asked several times during the roadshow, ‘Why aren’t you raising more capital?’” Sarah Jewett, Fervo’s senior vice president of strategy, shared with TechCrunch. “As we observed the demand increasing, there were just enough indications suggesting that upsizing was not only possible, but also advisable.”

Similar to many other energy firms, Fervo has been supported by a spike in demand from data centers and AI enterprises, which are eager to secure power for their operations. It marks the second energy stock offering to receive a positive response recently, with nuclear startup X-energy securing $1 billion in its own expanded IPO. 

The fundamental idea behind geothermal energy — harnessing the Earth’s warmth for power — has existed for years, yet Fervo belongs to a new wave of startups pioneering enhanced geothermal, which drills deeper to access hotter rock formations. To maximize the effectiveness of a favorable geothermal site, Fervo employs directional drilling methods developed by the oil and gas sector.

“We’re replicating the strategy used in the shale energy industry, but with the answer key,” Jewett remarked.

Fervo’s IPO yielded the company $500 million more than it had expected, providing a financial cushion that grants the company more flexibility as it works on its Cape Station power plant in Utah, set to begin operations this year. Ultimately, the firm aims to produce 500 megawatts once Cape Station’s initial phase is completed, projected to take approximately three years.

The 500 megawatt capacity of Cape Station was determined by the size of the grid interconnection the company secured, but Fervo is authorized to develop up to 2 gigawatts of geothermal energy there, and it has applied for an increase in the size of its interconnection as well. However, even that might be a conservative projection. Jewett stated that a third-party engineer indicated sufficient heat on-site for as much as 4 gigawatts of capacity.

The additional electricity could be directed to the grid if the interconnection capacity expands. If not, Fervo has been responding to inquiries from companies interested in direct connections. “We’re observing a growing amount of behind-the-meter commercial interest,” Jewett noted.

Fervo is at an earlier stage of development on another initiative. Corsac Station in Nevada, from which Google will procure 115 megawatts of power.

One of geothermal’s attractions is its ability to deliver so-called baseload power, a source capable of generating electricity around the clock, irrespective of weather conditions. Data center operators, who prioritize high uptime, are currently willing to pay a premium for reliable power. This has transformed geothermal from merely another clean energy technology competing for grid space into a preferred choice among tech firms and, now, investors.

The Houston-based company has been racing to lower expenses by shortening the duration of drilling new wells. Fervo’s initial wells took many days to complete and cost over $1,000 per foot. Now, after drilling 14 wells, the company has decreased both drilling time and cost per foot by two-thirds.

This IPO was likely overdue, yet with growing interest in energy, its timing could not have been more opportune.

Fervo disclosed in December that it had concluded a $462 million funding round, and climate tech and energy investors that TechCrunch consulted with late last year almost universally anticipated the company’s IPO. Interest from hyperscalers, in conjunction with data from its Cape Station project, suggested that the company had successfully navigated the “valley of death.” With the IPO behind it, it appears Fervo is now firmly on stable ground.