ENERGY & THE AI RACE

As the scale of the AI industry and its reliance on computing power grows, the bottleneck will move from chips to electricity

- Vittorio Quaglione

Data-center investments hint at a coming shift in the AI race. Soon, if not already, reliable, affordable electricity will confer the decisive advantage in the sector.

As Albert O. Hirschman argued in National Power and the Structure of Foreign Trade, an economy's true power lies in its ability to manage the choke points that affect its industries. In the AI ecosystem, the United States has been leveraging its dominance in chip design by strategically limiting exports to China, while China has exerted pressure on the US through its control of rare-earth materials needed to manufacture chips, magnets, and other components of advanced technology.

But as the scale of the AI industry and its reliance on computing power grows, the bottleneck will move from chips to electricity, because all the data centers in the world will not help you if they lack a continuous supply of affordable energy. The International Energy Agency estimates that roughly 20% of planned global data-center capacity will be at risk by 2030, owing to grid bottlenecks and interconnection queues. And as energy supplies are constrained, costs will rise, eventually trickling down to households and firms.