Power Supply Emerges as Critical Bottleneck in AI Development Race, Says Microsoft CEO Satya Nadella

Microsoft Chairman and Chief Executive Officer Satya Nadella

In the global competition for AI supremacy, American technology giants possess both the financial resources and computational chips, but their ambitious plans are now confronting a significant obstacle: electrical power.

"The biggest issue we are now having is not a compute glut, but it's the power and...the ability to get the builds done fast enough close to power," Microsoft CEO Satya Nadella revealed during a recent podcast conversation with OpenAI chief Sam Altman.

"So if you can't do that, you may actually have a bunch of chips sitting in inventory that I can't plug in," Nadella further explained.

Reminiscent of the 1990s dotcom rush to establish internet infrastructure, today's technology giants are investing unprecedented amounts to construct the silicon foundation for the artificial intelligence revolution.

Google, Microsoft, AWS (Amazon), and Meta (Facebook) are leveraging their substantial cash reserves to spend approximately $400 billion in 2025 and even more in 2026 -- currently supported by enthusiastic investors.

This massive financial injection has helped alleviate one initial constraint: acquiring millions of chips needed for the computing power race, with tech giants accelerating their in-house processor production as they attempt to challenge global leader Nvidia.

These processors will populate the racks filling enormous data centers -- facilities that also consume vast quantities of water for cooling purposes.

Constructing these massive information warehouses requires an average of two years in the United States; installing new high-voltage power lines takes between five to 10 years.

The "hyperscalers," as major tech companies are known in Silicon Valley, anticipated this energy barrier approaching.

A year ago, Virginia's primary utility provider, Dominion Energy, already had data-center orders totaling 40 gigawatts -- equivalent to the output of 40 nuclear reactors.

The capacity it must deploy in Virginia, the world's largest cloud computing hub, has subsequently increased to 47 gigawatts, the company recently announced.

Already criticized for increasing household electricity costs, data centers in the United States could represent 7 percent to 12 percent of national electricity consumption by 2030, up from 4 percent today, according to various studies.

However, some experts suggest these projections might be exaggerated.

"Both the utilities and the tech companies have an incentive to embrace the rapid growth forecast for electricity use," Jonathan Koomey, a respected expert from UC Berkeley, cautioned in September.

As with the late 1990s internet bubble, "many data centers that are talked about and proposed and in some cases even announced will never get built."

If the projected growth materializes, it could create a 45-gigawatt shortage by 2028 -- equivalent to the consumption of 33 million American households, according to Morgan Stanley.

Several US utilities have already postponed the closure of coal plants, despite coal being the most climate-polluting energy source.

Natural gas, which currently powers 40 percent of data centers worldwide according to the International Energy Agency, is experiencing renewed interest because it can be deployed rapidly.

In Georgia, where data centers are proliferating, one utility has requested authorization to install 10 gigawatts of gas-powered generators.

Some providers, as well as Elon Musk's startup xAI, have quickly purchased used turbines from abroad to build capacity. Even recycling aircraft turbines, previously a niche solution, is gaining popularity.

"The real existential threat right now is not a 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.

Technology 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 are promoting long-term projects.

Amazon is advocating for a nuclear revival through Small Modular Reactors (SMRs), an experimental technology that would be easier to construct than conventional reactors.

Google plans to restart a reactor in Iowa in 2029. The Trump administration announced in late October an $80 billion investment to begin construction on ten conventional reactors by 2030.

Hyperscalers are also investing heavily in solar power and battery storage, particularly in California and Texas.

The Texas grid operator plans to add approximately 100 gigawatts of capacity by 2030 from these technologies alone.

Finally, both Elon Musk, through his Starlink program, and Google have proposed placing chips in orbit in space, powered by solar energy. Google plans to conduct tests in 2027.