Texas Pacific Land: From Oil Riches to AI Goldmine with S&P 500 Surge
1min read Texas Pacific Land Corporation, a venerable landholder founded over 130 years ago, has unexpectedly emerged as a beneficiary of the artificial intelligence (AI) boom. Recently, TPL's stock rose by more than 14% last Friday, culminating in a weekly surge of over 27%. Despite a near 8% drop on Monday, the stock has maintained an impressive annual increase of approximately 210%, solidifying its position as a standout performer in the S&P 500.
The company's inclusion in the S&P 500 index came as it replaced Marathon Petroleum, amidst its acquisition by ConocoPhillips. By the end of last week, TPL's market cap approached $40 billion, surpassing renowned names like Kraft Heinz and Yum! Brands.
Texas Pacific Land Corporation, originally established in 1888 as Texas Pacific Land Trust, is now one of the largest landowners in Texas, with about 100 employees. Predominantly situated in the oil-rich Permian Basin, TPL holds about 873,000 acres, generating revenue through surface and royalty rights linked to oil wells without directly engaging in petroleum production.
Reports suggest TPL's lands are being explored for developments like Bitcoin mining facilities, utility-scale batteries, and renewable energy projects. With natural gas costs in the region nearly negligible, the area presents a lucrative opportunity for tech giants such as Microsoft and Amazon, potentially serving as a low-cost power source for data centers.
Amid the burgeoning interest in AI infrastructure, companies like Alphabet, Microsoft, Amazon, and Meta Platforms are poised to inject over $200 billion collectively by next year, much of which is expected to focus on data center construction.
Industrial trends predict that various sectors will feel the seismic effects of AI investment, turning seemingly obscure entities into attractive ventures by unlocking newfound value, as pointed out by some industry analysts.
While TPL's assets gained prominence during the shale oil boom, they continue to draw significant royalty revenues from energy heavyweights like ExxonMobil, Chevron, and ConocoPhillips, with quarterly figures nearing $100 million, underpinned by a Q3 adjusted EBITDA margin of 83%.
Even as TPL's CEO Tyler Glover remains cautious about the immediate establishment of large-scale data centers on TPL's properties, he emphasizes the firm's prime positioning to benefit from the AI-driven growth, given TPL's extensive land holdings in West Texas. "No one here has more land than we do," he asserts, highlighting the strategic advantage.