{"id":137147,"date":"2025-11-13T07:21:19","date_gmt":"2025-11-13T07:21:19","guid":{"rendered":"https:\/\/www.newsbeep.com\/ie\/137147\/"},"modified":"2025-11-13T07:21:19","modified_gmt":"2025-11-13T07:21:19","slug":"deep-dive-ais-low-tech-problem","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ie\/137147\/","title":{"rendered":"DEEP DIVE: AI’s Low-Tech Problem"},"content":{"rendered":"

With lofty valuations\u00a0in\u00a0AI-related\u00a0stocks,\u00a0it’s understandable that investors are on edge about anything that might go wrong. Recently, concerns have\u00a0centered\u00a0on the ability\u00a0to bring new AI data centers online at the volume\u00a0AI providers require. While funding for construction is flowing, a lack of electricity and permitting\u00a0\u2014 two very low-tech problems \u2014 might be the Achilles’\u00a0heel of\u00a0this otherwise high-tech industry.<\/p>\n

Demand for AI is growing unabated. On Tuesday, AMD CEO Lisa Su\u00a0told investors<\/a>\u00a0that the company’s AI data center revenue should grow by about 80% per year over the next three to five years. As a result, AMD’s total revenue is forecast to increase by roughly 35% annually over the same period, which exceeded analysts’ estimates. The company’s stock price has been soaring (chart).<\/p>\n

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But AI data center provider CoreWeave threw cold water on any excitement after warning that its Q4 results would miss expectations because a developer failed to deliver data centers on time. Infrastructure that was expected to come online in Q4 will instead come online in\u00a0Q1-2026\u00a0and Q2-2026. The delay didn’t cost the company any customers,\u00a0and demand for space in its data centers is still insatiable, CEO Mike Intrator\u00a0told<\/a>\u00a0CNBC. But the company did reduce its 2025 revenue forecast range to $5.05 billion to $5.15 billion, below analysts\u2019 forecast of $5.29 billion.<\/p>\n

Microsoft CEO Satya Nadella also recently\u00a0raised concerns<\/a>\u00a0about construction delays. \u201cThe biggest issue we are now having is \u2026 the ability to get the [data center]\u00a0builds done fast enough, close to power. So\u00a0if you can’t do that, you may actually have a bunch of chips sitting in inventory that I can’t plug in. In fact, that’s my problem today. It’s not a supply issue of chips. It’s actually the fact that I don’t have warm shells to plug into.\u201d A \u201cwarm shell\u201d is a new data center ready for occupancy.<\/p>\n

We wonder if this is the beginning of many problems the industry will face trying to build and deliver data centers on time. Here\u2019s a look at some of the numbers surrounding AI data center demand, supply, and electricity:<\/p>\n

(1) \u200eA building spree.\u00a0Even before AI hit the scene, the number of data centers in the US had been on\u00a0the rise as more people and businesses increasingly relied on cloud computing to process, analyze, and store their ever-increasing data.\u00a0The advent of AI pushed that trend into hyperdrive.<\/p>\n

Monthly spending on data center construction starts rose to a record\u00a0$4.2 billion in August, based on a 12-month moving average. That’s up 100% from\u00a0the\u00a0August 2024\u00a0level\u00a0and 400% from August 2023,\u00a0ConstructConnect<\/a>\u00a0<\/a>reports. Spending ytd through August at $40 billion had already surpassed the full-year 2024 record (chart). Building has also gotten more expensive, with the average cost per square foot rising to $977 in August, up from $665 a year prior.<\/p>\n

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The US leads the world in data centers,\u00a0with 4,189 to date\u00a0\u2014 far exceeding the number in any other country, according to the\u00a0Data Center Map<\/a>. The UK has 511 data centers, followed by Germany (487), China (381), France (321), Canada (294), India (276), Australia (275), Japan (247), Italy (209), and others had\u00a0even fewer\u2014those\u00a0tracked range from hyperscale data centers to edge data centers.<\/p>\n

(2)\u00a0A power problem.\u00a0US\u00a0data centers consumed 183 terawatt-hours (TWh) of electricity in 2024, according to IEA estimates cited in a Pew Research Center October 24\u00a0report<\/a>. That works out to more than 4% of the country\u2019s total electricity consumption last year. By 2030, consumption is projected to grow by 133% to 426 TWh.<\/p>\n

A third of data centers are in Virginia, Texas, and California, Pew reports. Because data centers are often geographically concentrated, they can tax electric grids. For example, about 26% of the total electric supply in Virginia is consumed by data centers.<\/p>\n

There are growing concerns that data center demands are driving up electricity prices today and will continue to do so in the future. In recent years, electricity rates have increased as utilities have replaced aging equipment to protect against extreme weather events and cyberattacks. The typical US household was billed $142 a month for electricity last year, up 25% from $114 a month in 2014 (chart). Consumers worried about their electric bills are unlikely to support the construction of new data centers in their communities.<\/p>\n

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Access to electricity is also causing headaches for those building data centers. Utility connection delays of up to five years are the most significant obstacle for data center growth, reports\u00a0Bain & Company<\/a>.<\/p>\n

(3)\u00a0Looking to the stars.\u00a0Currently,\u00a0data centers receive their energy from traditional electricity sources. Natural gas-powered utilities supplied more than 40% of the electricity used by data centers in 2024. Renewables, like wind and solar power, supplied 24% of the electricity, nuclear about 20%, and coal around 15%, Pew reported.<\/p>\n

Going forward, data center companies are looking at traditional sources as well as new ones to augment power supplies. Google Research is exploring space via its\u00a0Project Suncatcher<\/a>. \u00a0The moonshot project is described as placing a constellation of solar-powered satellites carrying Google TPUs into low-earth orbit and connecting them via free-space optical links to create space-based AI infrastructure (chart).<\/p>\n

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To turn this idea into a reality, Google will need to overcome several challenges, including establishing high-bandwidth communication between the satellites, managing orbital dynamics, and protecting equipment from radiation damage. Placed in the right orbit, a solar panel can be eight times more productive in space than it is on Earth, producing power nearly continuously and\u00a0reducing the need for batteries.<\/p>\n

Google believes that by the mid-2030s, the cost of launching satellites should fall enough to make the cost of launching and operating a space-based data center roughly comparable to the energy costs of a data center on Earth. It plans to launch two prototype satellites by early 2027 to test how its models and TPU hardware operate in space and validate the use of optical intersatellite links for distributed machine learning tasks.<\/p>\n

\ud83d\udca1<\/p>\n

Join the discussion with Ed below! To leave comments or questions, log in to the Yardeni QuickTakes website and post them at the end of the QuickTakes article. Paid members’ contributions may be featured in our segment, “Ed Answers Your Questions”.<\/p>\n","protected":false},"excerpt":{"rendered":"With lofty valuations\u00a0in\u00a0AI-related\u00a0stocks,\u00a0it’s understandable that investors are on edge about anything that might go wrong. Recently, concerns have\u00a0centered\u00a0on…\n","protected":false},"author":2,"featured_media":137148,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[220,218,219,61,60,80],"class_list":{"0":"post-137147","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-artificial-intelligence","8":"tag-ai","9":"tag-artificial-intelligence","10":"tag-artificialintelligence","11":"tag-ie","12":"tag-ireland","13":"tag-technology"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/137147","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=137147"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/137147\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/137148"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=137147"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=137147"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=137147"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}