Chevron, Exxon And Shell Shift Focus To Powering AI Growth

The U.S. energy sector posted a strong 2025 opening, outperforming other sectors as crude prices soared and the Market anticipated a deregulatory shift under Donald Trump’s government.

Major oil companies Exxon Mobil Corp XOM, Chevron Corp CVX, and Shell Plc SHEL, once the asset-light hypergrowth Big Tech antithesis are now targeting Big Tech to drive value.

Chevron, GE Vernova GEV and Engine No. 1 launched a joint venture to power artificial intelligence data centers by 2027. Exxon will focus on providing low-carbon power through its carbon capture business.

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Shell wants to use its solar energy and battery storage arm and its natural gas plant in Rhode Island.

The Big Oil trio’s fourth-quarter earnings grappled with fossil fuel supply outstripping demand, which took a toll on their margins, prompting them to depend on Big Tech energy supply as the latter splurge on their aggressive artificial intelligence data center ambitions, Bloomberg reports.

However, China’s DeepSeek’s cheaper and low-power AI model’s emergence rivaling Microsoft Corp MSFT backed OpenAI, and other Big Tech giants posed a letdown for the oil companies by potentially cutting the need for data centers. The oil companies are betting on the growing demand for natural gas-generated electricity.

Big Oil resorted to buybacks and dividends to lure investors as the prospect of peak oil demand looms. However, the shareholder return strategy reached its limit.

Exxon paid out its entire free cash flow of $36.0 billion in 2024 dividends and buybacks, yet still trades at a 46% discount to the S&P 500 Index average.

It plans to expand its annual $20 billion share repurchase program through 2026. Chevron returned $27.0 billion of cash to shareholders in the year.

The U.S. is now the world’s biggest oil producer. Yet energy stocks make up just 3.2% of the S&P 500. Part of Big Oil’s discounted valuation is due to its high capital spending that failed to yield returns.

Due to the energy transition, the Street remains jittery over the sustainability of dividends and buybacks. The volatility of commodity-price swings also dampened the valuation of fossil fuels compared to cash-rich Big Tech.

Goldman Sachs’ Daan Struyven expects Donald Trump’s 25% tariffs on Canada to raise the price of fuels in the U.S. and drive inflation. Higher transport costs could also affect the profits of oil marketing companies.

Struyven recently said he expects oil prices to reach $90 per barrel if the U.S. further tightens Russia, Iran, and Venezuela’s oil supply.

Investors can gain exposure to crude oil through the United States Oil Fund USO and ProShares Ultra Bloomberg Crude Oil UCO.

Price Actions: At last check on Monday, XOM stock was down 0.37% to $106.43. CVX is up 0.10%, and SHEL is down 1.06%.

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