Why Fermi Stock Collapased 37.9% in July

Shares of Fermi (FRMI -0.16%) fell 37.9% in July, according to data from S&P Global Market Intelligence. The AI trade came to a halt in July, and power beneficiaries like Fermi crashed along with it. A company trying to build a private electric grid in Texas, Fermi made its public markets debut last year and has seen its stock sink a quick 80% from its highs.

Here’s why it fell again in July, and whether shares are worth buying the dip on today.

Huge cash burn

Fermi’s pitch to investors is to build a massive amount of power generation in Texas for private consumption, meaning for artificial intelligence (AI) data centers. There are clearly a ton of data centers being built in Texas, which Fermi could help companies get to market by bringing power directly to them.

The stock went public in late 2025, but it quickly dropped after a major partner backed out of its AI energy campus in Texas, leading management to raise money to pursue its ambitions. The company has continued investing capital in its campus, resulting in significant cash burn before its power plants are operational.

Last month, Fermi raised capital through a convertible notes offering. Capital raises generally mean a falling share price as the market digests the potential dilution or debt being added to the balance sheet, and this is exactly what happened with Fermi in July.

Fermi spent $441 million on capital expenditures in the first three months of 2026, while generating zero revenue, indicating an aggressive build-out plan. Still, it has delayed bringing these energy assets online until 2027, instead of its original goal of this year.

Time to buy the dip?

Fermi is going to keep burning cash as it aims to build up these power assets in Texas, which will lead to more capital raises and likely a falling stock price.

Long-term, it’s possible that value can be created if Fermi can lock in long-term contracts with power-hungry data center companies. It aims to deliver up to 17 gigawatts of power, which would be a staggering amount for a company invented out of thin air a few years ago.

The stock has quickly fallen 80% from its highs, but still has a market cap of $3.9 billion. There is likely further shareholder dilution and additional debt to be added to the balance sheet, making it difficult for Fermi to bridge the gap from start-up to revenue generation. Stay away from putting this stock in your portfolio.