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Technology evolves fast, but true disruption is rare. AI is advancing at a breakneck pace, rivaling the internet’s adoption 30 years ago. But there’s a catch—AI’s insatiable demand for power is reshaping the global energy landscape.

For decades, U.S. electricity demand was steady… until electrification kicked in. Now, artificial intelligence is supercharging energy consumption, with data centers becoming the new power plants of the digital age.

Transcript

Technology advances rapidly, but true disruption is rare. AI has emerged at breakneck speed, rivaling the internet’s adoption 30 years ago. One of the biggest ripple effects? Soaring electricity demand, fueled by both AI and electrification. Let’s take a look

For much of the 20th century, power demand steadily climbed—until it flatlined in the early 2000s, because every new structure, appliance, or light bulb became more efficient. (insert chart 1) About 10 years ago  “electrification”, or shifting from fossil fuels like oil or gas to electricity, changed the game. The global shift to electric vehicles, smart homes, and industrial electrification started dramatically increasing electricity demand.

In response, modernizing and relieving the strain on the electrical grid in the US has been ongoing but now there is a new variable: artificial intelligence. The power backbone of AI is data centers. These facilities are essentially the new power plants of the digital age. Data processing for these new models like OpenAI’s ChatGPT or Google’s Gemini requires an enormous amount of computing power. (insert chart 2) Each data center can consume as much energy as a small town so as AI applications grow, so will energy demand.

There is a massive investment underway. Orders and plans for natural gas supply and new or resurrected nuclear plants are popping up seemingly by the day. In October, Constellation Energy announced a joint venture to restart Pennsylvania’s Three Mile Island plant to power Microsoft data centers. NextEra, held in the Argent Dividend Select portfolio, is working to revive Iowa’s Duane Arnold nuclear plant. The race for more power is on.

There is a catch, power plants don’t spring up overnight. The last full scale nuclear plant to come online was Georgia Power’s Vogtle facility in the spring of 2024 but it was a long road. The regulatory process started in 2006 and construction began in 2013.

Renewables are a growing part of the solution and represent around 70% of the planned additions to the US grid between 2025 and 2030 but we need better battery storage, and means of transmission to where the power is needed.

Small modular nuclear reactors have a lot of potential, but it’s not a present day answer either. Projections in the US are for deployment sometime in the mid 2030s.

Fortunately, efficiency gains for new technology are always part of the equation. Moore’s law in the semiconductor industry bares that out. The industry exploded precisely because the proficiency of semiconductors went up massively but the costs per transistor have declined 20% per year for the last 50 years.

Whether or not China’s DeepSeek AI model true cost was $6 million or $6 billion, there will be efficiency gains. Perhaps the data center buildout will be less pronounced than current estimates as power needs are reassessed or perhaps the cheaper costs will encourage all sorts of new applications yet to be developed and demand will increase. One thing is for certain, we need more electricity, and it’s only a question of how much and where we get it.

Thanks very much for watching

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