Big Tech Will Scour the Globe in Its Search for Cheap Energy
NEWS | 18 December 2024
On the southern tip of Malaysia lies the state of Johor, renowned for its beaches and mountainous jungle. But Johor has a new boom industry: data centers to power generative AI, with Microsoft committing more than $2 billion on just such a data center. For the tech giants, electricity has become the new oil. A state-of-the-art AI data center might need 90 megawatts, enough to power tens of thousands of American homes. With AI applications proliferating, from chatbots to AI agents, needs are growing. One industry consortium is planning for data centers requiring 10 gigawatts (more than a hundred times the demand of today’s largest). Securing cheap, reliable power is now as crucial to tech firms as silicon chips. In 2025, the big tech firms will scour the globe for kilowatts, megawatts, and gigawatts. In board meetings, discussions about server capacity are increasingly overshadowed by discussions on grid capacity and energy futures. Nations blessed with abundant low-cost energy are leveraging this newfound advantage and crafting policies to attract AI investments with the zeal once reserved for manufacturing. Regions that have historically won the data center ark, such as Ireland and Singapore, have found their capacity strained to bursting before the GenAI boom. This has created opportunities for unlikely competitors, not just Malaysia but Indonesia, Thailand, Vietnam, and Chile. Latency is less important than keeping the electrons flowing. Low-cost energy has long been a priority for firms. Just as companies in the past co-located their refineries near ports, their factories near coal mines, AI firms are trying to position themselves near where they can get electricity consistently—and at great prices. Location ultimately does matter. Half of the energy cost in a data center typically comes from running cooling systems and air-conditioning to keep the servers from overheating. Cooler climates or coastal areas will start to become more in demand as potential sites. READ MORE This story is from the WIRED World in 2025, our annual trends briefing. This draw to deliver AI is so powerful that big tech firms are buying dirty power to meet it, putting their own and local economies' decarbonization targets at risk. Countries hotly compete for the business of data centers. Tax breaks are popular: More than half of US states—including Arizona, New York, and Texas—offer operators some form of tax break, and even preferential rates for buying land and committing to access to power. In Malaysia, Green Lane Pathway initiatives expedite construction approvals, cutting through red tape to fast-track construction—and power lines—for data centers. This interplay between watts and algorithms is redrawing the map of global influence. It's a shift as profound as the oil boom of the 20th century, but far less visible. No pipelines are being built, no tankers are changing course. Instead, nondescript warehouses humming with servers are becoming the new geopolitical hot spots. The extent to which this shifts global influence is unclear. The real research on AI—where the breakthroughs happen—will remain in the research hubs of San Francisco, London, Beijing, and Paris. The data centers that take these algorithms to market, however, will be a low-margin, pile-it-high and sell-it-cheap business. This electro-diplomacy will be a key pillar for the next couple of years. Scaling AI is less about algorithms and more about electronics. However, nations capitalizing on this moment should be wary; their advantage may prove fleeting as dominant economies figure out how to bring cheap, clean power online in sufficient quantities to incentivize domestic hosting. For today's energy-rich providers of AI data centers, the challenge lies in transforming this fleeting advantage into a sustainable edge. They will need to go beyond attracting data centers to building their own enduring innovation ecosystems that can thrive long after the “electricity rush” subsides.
Author: Lily Hay Newman. Azeem Azhar. Paresh Dave. David Miliband. Kai-Fu Lee. Claire Atkin. Rumman Chowdhury. Genevieve Guenther. Chris Dixon. Ayana Elizabeth Johnson.
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