Jan 28 (Reuters) - Oil and gas producer Chevron ( CVX )

said on Tuesday it plans to build natural gas-based power plants

next to data centers in the U.S., as energy demand to support

the growth of artificial intelligence is expected to boom.

The second-largest U.S. producer is partnering with investment

firm Engine No. 1 and electric services company GE Vernova ( GEV )

on the project.

Chevron's ( CVX ) announcement comes a day after Chinese startup

DeepSeek unveiled an AI model that it says uses far less

computing power than industry-leading models in the United

States, prompting investors to question the billions of dollars

spent on AI infrastructure and sparking a massive sell-off in

tech and power stocks.

Despite the market's reaction, DeepSeek demonstrates the

energy requirements that will be needed to support the United

States' ability to compete in the global AI race, said Jeff

Gustavson, president of Chevron New Energies, during a press

briefing.

"It underscores how competitive and fast-moving this is," he

said. "We still see the growth in electricity demand."

The project will use GE Vernova's ( GEV ) natural gas turbines to

deliver up to 4 gigawatts of power - enough to power roughly 3

million homes - to data centers located in the U.S. Southeast,

Midwest and West regions.

The power will initially bypass the existing transmission

grid, which reduces the risk of raising electricity costs for

households and consumers, the company said.

Chevron ( CVX ) said it is in conversations with multiple potential

customers to determine the locations of the data centers and

power plants, declining to name who it is speaking with. Chevron ( CVX )

expects to begin initial service by the end of 2027, with the

potential for project expansion beyond the 4-GW capacity.

"President Trump's pro-American energy policies and

commitment to energy and AI dominance give us the confidence to

invest in projects that will create American jobs and strengthen

our national security," Chevron ( CVX ) CEO Mike Wirth said in a

statement.

The projects are also expected to be designed to potentially

integrate carbon capture and storage, and renewable energy

resources.