SAN FRANCISCO: In the race for AI dominance, US tech giants have the money and the chips, but their ambitions have hit a new hurdle: electric power.
“The biggest problem we have now is not an abundance of computers, but it’s the power and… the ability to get built fast enough close to power,” Microsoft CEO Satya Nadella acknowledged on a recent podcast with OpenAI chief Sam Altman.
“So if you can’t do that, you might actually have a bunch of chips in stock that I can’t plug,” Nadella added.
Echoing the dotcom frenzy of the 1990s to build Internet infrastructure, today’s tech giants are spending unprecedented sums to construct the silicon backbone of the artificial intelligence revolution.
Google, Microsoft, AWS (Amazon) and Meta (Facebook) are drawing on their huge cash reserves to spend around $400 billion in 2025 and even more in 2026 – so far backed by enthusiastic investors.
All that cash has helped ease an initial bottleneck: procuring the millions of chips needed for the computing power race, and the tech giants are accelerating their in-house processor output as they seek to chase global leader Nvidia.
These will go into the racks that fill the massive data centers – which also consume huge amounts of water for cooling.
Building the massive information warehouses takes an average of two years in the US; commissioning new high-voltage lines takes five to 10 years.
Energy wall
The “hyperscalers”, as large technology companies are called in Silicon Valley, saw the energy wall coming.
A year ago, Virginia’s main utility provider, Dominion Energy, already had a data center order book of 40 gigawatts — equivalent to the output of 40 nuclear reactors.
The capacity it will install in Virginia, the world’s largest cloud computing hub, has since increased to 47 gigawatts, the company announced recently.
Data centers in the U.S., already blamed for increasing household electricity bills, could account for 7% to 12% of national consumption by 2030, up from 4% today, according to various studies.
But some experts say the projections may be exaggerated.
“Both utilities and technology companies have an incentive to embrace the rapid growth forecast for electricity use,” Jonathan Koomey, a noted UC Berkeley expert, warned in September.
As with the Internet bubble of the late 1990s, “many data centers that are talked about and proposed and in some cases even advertised will never be built.”
Emergency coal
If the projected growth does materialize, it could create a shortfall of 45 gigawatts by 2028 — equivalent to the consumption of 33 million American households, according to Morgan Stanley.
Several US utilities have already delayed closing coal plants, despite coal being the most climate-polluting energy source.
And natural gas, which powers 40% of data centers worldwide, is seeing renewed favor because it can be deployed quickly, according to the International Energy Agency.
In the US state of Georgia, where data centers are proliferating, a utility has applied for permission to install 10 gigawatts of gas-powered generators.
Some providers, as well as Elon Musk’s startup xAI, have rushed to buy used turbines from abroad to quickly build capacity. Even recycling aircraft turbines, an old niche solution, is gaining traction.
“The real existential threat right now is not the degree of climate change. It’s the fact that we could lose the AI arms race if we don’t have enough power,” Interior Secretary Doug Burgum argued in October.
Nuclear, solar and space?
Tech giants are quietly downplaying their climate commitments. Google, for example, promised net-zero CO2 emissions by 2030, but removed that promise from its website in June.
Instead, companies promote long-term projects.
Amazon is fighting for a nuclear revival through Small Modular Reactors (SMRs), a so far experimental technology that would be easier to build than conventional reactors.
Google plans to restart a reactor in Iowa in 2029. And the Trump administration announced in late October an $80 billion investment to begin construction of ten conventional reactors by 2030.
Hyperscalers are also investing heavily in solar and battery storage, especially in California and Texas.
The Texas grid operator plans to add approximately 100 gigawatts of capacity by 2030 from these technologies alone.
Finally, both Elon Musk, through his Starlink program, and Google have proposed putting chips into orbit in space, powered by solar energy. Google plans to conduct tests in 2027.
