SAN FRANCISCO: In the battle for AI supremacy, US tech giants have the capital and the chips, but their ambitions now face a new barrier: electrical energy.
“The biggest problem we face now isn’t a surplus of computers, it’s the power and… the ability to get the builds done 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 have a bunch of chips in your inventory that I can’t plug in,” Nadella added.
Following the dot-com frenzy of the 1990s to build internet infrastructure, today’s tech giants are spending unprecedented amounts to build the silicon backbone of the artificial intelligence revolution.
Google, Microsoft, AWS (Amazon) and Meta (Facebook) are tapping into their massive cash reserves to spend roughly $400 billion in 2025, and more in 2026 – supported for now by eager investors.
All this money has helped ease an initial bottleneck of acquiring the millions of chips needed for the race for computing power, and the tech giants are ramping up their internal processor production as they try to chase global leader Nvidia.
These go to the racks that fill the enormous data centers – which also use enormous amounts of water for cooling.
Building the massive information repositories takes an average of two years in the United States; Commissioning new high-voltage lines takes five to ten years.
Energy wall
The ‘hyperscalers’, as large technology companies in Silicon Valley are called, saw the energy wall coming.
A year ago, Dominion Energy, Virginia’s main energy supplier, already had an order book for data centers of 40 gigawatts – equivalent to the production of 40 nuclear reactors.
The capacity it needs to deploy in Virginia, the world’s largest cloud computing hub, has since risen to 47 gigawatts, the company recently announced.
Data centers in the United States, which are already responsible for driving up household electricity bills, could represent 7% to 12% of national consumption by 2030, up from 4% now, according to several 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 consumption,” Jonathan Koomey, a renowned expert at UC Berkeley, warned in September.
As with the dot-com bubble of the late 1990s, “many data centers that are being talked about, proposed, and in some cases even announced will never be built.”
Emergency coal
If projected growth materializes, there could be a 45 gigawatt shortfall by 2028 – equivalent to the consumption of 33 million US households, according to Morgan Stanley.
Several US utilities have already postponed the closure of coal-fired power plants, despite coal being the most climate-polluting energy source.
And natural gas, which powers 40% of data centers worldwide according to the International Energy Agency, is enjoying renewed popularity because it can be deployed quickly.
In the US state of Georgia, where data centers are becoming increasingly larger, a utility company has requested permission to install 10 gigawatts of gas generators.
Some providers, as well as Elon Musk’s startup xAI, have rushed to purchase used turbines from abroad to quickly build capacity. Even the recycling of aircraft turbines, an old niche solution, is gaining ground.
“The real existential threat right now isn’t any 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 energy, solar energy and space travel?
Tech giants are quietly downplaying their climate commitments. Google, for example, promised net-zero carbon emissions by 2030, but removed that pledge from its website in June.
Instead, companies promote long-term projects.
Amazon is advocating a nuclear revival through Small Modular Reactors (SMRs), a still-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 at the end of October announced an investment of $80 billion to begin building 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 with these technologies alone.
Finally, both Elon Musk, through his Starlink program, and Google have proposed putting chips into orbit powered by solar energy. Google plans to start testing in 2027.
