Exxon Mobil Corporation XOM announced that it will invest $100 million in its chemical plant in Baton Rouge, LA. The investment will be used for the upgradation of the chemical complex to produce a highly purified form of isopropyl alcohol. The substance, used to clean and process microchips, is witnessing an increasing demand from the tech industry.
ExxonMobil’s decision to spend on the upgradation at its chemical facility comes amid a surge in demand for microchips, driven by the rise of artificial intelligence (AI) and advanced cloud computing. The boom in AI is driving tech companies to build additional data centers, which require specialized chips along with in-house chips used by these companies to train specialized AI models. This is expected to result in a surge in demand for high-purity isopropyl alcohol, which is required for cleaning these chips.
ExxonMobil stated that the upgrades at the chemical plant are expected to be completed by 2027. The upgraded chemical facility shall allow XOM to meet the increasing demand for the product in the United States. The upgraded facility will enable XOM to scale production levels and cater to the growing domestic market. An ExxonMobil representative mentioned that the increased production will be used to support the semiconductor fabrication plants (fabs) in the United States that are currently under construction.
U.S.-based companies have to import high-purity isopropyl alcohol from Taiwan and Japan to meet their needs, as the domestic production and supply are not enough, according to a report by SEMI, a semiconductor trade association. XOM has further mentioned that the rising production from its chemical plant will be dedicated to meeting domestic needs, as exporting the product may pose greater risks to its purity levels.
XOM’s Zacks Rank and Key Picks
XOM currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the energy sector are Archrock Inc. AROC, Nine Energy Service NINE and NextDecade Corporation NEXT. While Archrock currently sports a Zacks Rank #1 (Strong Buy), Oceaneering International and NextDecade carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Archrock is an energy infrastructure company based in the United States with a focus on midstream natural gas compression. It provides natural gas contract compression services and generates stable fee-based revenues.
Nine Energy Service provides onshore completion and production services for unconventional oil and gas resource development. The company operates across key prolific basins in the United States, including the Permian, Eagle Ford, MidCon, Barnett, Bakken, Rockies, Marcellus and Utica, as well as throughout Canada. With a sustained demand for oil and gas in the future, the need for NINE’s services is anticipated to increase, which should position the company for growth in the long run.
NextDecade is an emerging player in the LNG space with its Rio Grande LNG project in Texas. The demand for LNG as a clean-burning fuel continues to grow, and the commodity is expected to play a crucial role in the energy transition process. The company’s focus on expanding its liquefaction capacity is expected to enhance its position in the rapidly growing global LNG market, enabling it to meet the rising demand for natural gas.
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