Data center real estate investment firm Fermi saw its shares plunge 40% on Friday after announcing that a prospective tenant terminated an agreement to fund the construction of its Texas project, dealing a significant blow to the newly public company.

Under the original terms of the now-canceled agreement, the undisclosed client was set to lease part of Fermi's "Project Matador" site in Texas and provide up to $150 million in construction financing. While discussions continue regarding a potential lease, the funding arrangement has been scrapped.

This development marks Fermi's first major challenge since its October IPO, which valued the company at $14.8 billion despite having no revenue. The startup, co-founded by former U.S. Energy Secretary Rick Perry, had attracted strong investor interest during its public debut amid surging demand for AI-related infrastructure.

The setback comes as investor caution grows toward the AI sector, with some questioning how long the rally can continue without clearer profitability pathways. Fermi's shares last traded at $9.08, down 57% from their $21 IPO price.