The energy arms race behind AI Data Centers
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Recently, I was researching the growing impact of AI Datacenter power needs on traditional power systems and the grid in the US. I came across this report from Bloomberg
Then yesterday this deal was announced: BlackRock, MGX Make $40 Billion Bet on AI Boom With Aligned Data Centers Deal Source: Bloomberg
It’s expected that any major deal like this in the AI datacenter industry, is naturally going to rattle the brain of anyone in the space with many questions.
Some of our questions at Futureline Global were:
How are the markets going to interpret the news?
Should this be viewed in the context of the Stargate project?
Why does Macquarie Asset Management, with such a buildup of assets in Aligned Data Centers, make a move like this, and how does this impress upon the growing audience of industry analysts, who are shouting "AI bubble"?
With various thoughts circling, two thoughts kept resonating.
Firstly, since the Stargate announcement, it appears like the AI arms race is accelerating*.
Then my thoughts centered back on the research I referred to earlier: AI’s impact on the US power grids. Then reviewing this report on Blackrock’s GIP deal, I noted:
"BlackRock and Aligned will have to find enough electricity for all the new data centers the two companies want to build. US power demand is surging after being stagnant for decades and data centers are projected to consume more than 4% of the world’s electricity by 2035, according to BloombergNEF."
4% seems small but it’s very significant. For comparison purposes, the average US household consumes around 880 kWh per month. If we consider the total annual electricity consumption in the US (which is roughly 4,000 terawatt-hours or 4 quadrillion watt-hours), 4% of that would be 160 terawatt-hours. This amount could power tens of millions of homes for a year.
Future implications
AI and new technologies are projected to increase electricity demand significantly. If AI data centers alone are projected to consume 4% of the entire US power grid in the near future, that indicates a massive surge in demand. This has implications for:
Grid Stability and Reliability: Can the existing infrastructure handle this additional load, or will new generation and transmission need to be built? The answer is most certainly yes. Creating dedicated power solutions that are independent of existing power transmission infrastructure will calm the waters significantly. The next point lends insight to the most probable response.
Energy Sources: Will this demand be met by fossil fuels, renewables, or nuclear power? This impacts carbon emissions and energy policy. I anticipate that nuclear energy is going to increase significantly in the energy mix for AI Datacenter power infrastructure needs. Renewables such as wind and solar just simply won’t be able to meet the demand due to its intermittent energy generation and therefore unreliable dependence on how strong the wind blows or how bright the sun shines. Yet, nuclear, even SMRs(small modular reactors) have their own hurdles, especially cost and regulatory, that can take decades to unravel. In fact, here is a Bloomberg green explainer on the question: Can Small Nuclear Reactors Help Power the AI Boom and Fight Climate Change?
Cost: Increased demand can lead to higher electricity prices for consumers and businesses.
SIDS (Smaller Island Developing States): See link here* for the detailed response by AI on potential implications for SIDS.
Innovation: There is an expectation of increase innovation focus on energy efficiency, grid management (AI-driven optimization), and new power generation technologies.
For a more detailed review of the comparison of 4% US Grid Power and future implications, review our prompt against Gemini here*
Considering there is a major global drive of climate advocacy, it’s only natural to consider that the convergence point between AI expansion and AI regulations seem to be on an accelerated collision course. Probably this explains Macquarie Asset Management essentially "getting out of the way" even though they themselves reaffirmed their commitment to AI Datacenter Infrastructure. We anticipate their next major move will be even more heavily in the power systems, energy space. Perhaps nuclear?
The arms race isn’t necessarily an AI arms race, but instead an energy arms race.
We prompted AI to capture its thoughts on our viewpoint. Its detailed response can be found here*
How can our research & insights shared here be of use?
It may be useful for research in strategy, engineering, finance, AI governance, AI data center design, investment strategy, environmental impact assessment research and more.
At Futureline Global, we don't just repackage services and sell you at a markup price. We are built on moving ideas to impact through the "sweet spot" combination of business strategy, technology and innovation. AI is an integral tool in our work, to such an extent, that we are preparing to launch Advanced Applied Artificial Intelligence (AAAi pronounced Triple-Ai), AAAi….Ai that serves you. AAAi will be the deepest application of skills in the widest variety of AI solutions in the Caribbean region. Because of our region’s position in the world’s “AI influence stack”, we anticipate that our best chance for becoming a strategic voice in the AI space is in the creative application of AI technology in depth and across a wide spectrum of existing solutions. By building capacity in this area, we anticipate a better opportunity to
Develop innovative Ai solutions in demand globally
Improve our capability in building our own native AI SaaS solutions
Influence capital investment and the primary “AI gatekeepers“ such as the owners of AI datacenters to form stronger alliances that can benefit our region.
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