Artificial intelligence may have hit an unexpected snag — there aren't enough powered data centers to keep up with the machines driving it. And now, Microsoft (NASDAQ:MSFT) has AI chips sitting idle because there's nowhere to plug them in.
On the "BG2Pod," a technology and investing podcast hosted by Brad Gerstner and Bill Gurley and featuring OpenAI CEO Sam Altman, Microsoft CEO Satya Nadella said the shortage of power has become the industry's biggest constraint.
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Too Many Chips, Not Enough Power
"The biggest issue we are now having is not a compute glut, but it's power," Nadella said. "It’s not a supply issue of chips. It’s actually the fact that I don’t have warm shells to plug into." The remarks referred to data centers that are incomplete or lack sufficient energy and cooling capacity.
Microsoft has slowed or paused some early-stage data center projects to address those constraints. Microsoft Cloud Operations and Innovation President Noelle Walsh said in an April LinkedIn post that the company is "slowing or pausing some early-stage projects" as part of the "largest and most ambitious infrastructure scaling project" in its history.
Alphabet Inc.'s (NASDAQ:GOOG, GOOGL)) Google has signed demand-response agreements with U.S. utilities to temporarily reduce data center power use during grid events and reschedule nonurgent computing to off-peak times, according to a company's blog post last month.
Amazon.com Inc. (NASDAQ:AMZN) has also outlined efforts to improve data center efficiency and support grid reliability as AI usage grows.
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Altman Warns Of Contract Risks
"If a very cheap form of energy comes online soon at mass scale, a lot of people are going to be extremely burned with existing contracts they've signed," Altman said on the podcast, explaining that shifts in global energy costs could pose significant risks for companies locked into long-term agreements.
He added that lower computing costs tend to drive demand higher, which can strain infrastructure that is already near capacity. Altman said the pace of AI's growth will depend on stable energy access, warning that sudden market changes could affect ongoing operations.
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Power As The New Competitive Edge
Microsoft owns about 27% of OpenAI and holds exclusive Azure cloud rights to OpenAI's models through 2030. Both companies depend on reliable electricity to operate data centers and expand capacity.
In response to rising demand, energy producers including Constellation Energy Corporation (NASDAQ:CEG), Vistra Corp. (NYSE:VST) and Brookfield Renewable Partners (NYSE:BEP) have signed major power deals with large technology firms, including 24/7 carbon-free energy arrangements.
Looking ahead, the International Energy Agency projects global data center electricity consumption will roughly double to around 945 terawatt-hours by 2030, representing just under 3% of global electricity demand.
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