Big technology companies will travel the world in search of cheap energy

At the southern tip of Malaysia is the state of Johor, famous for its beaches and mountainous jungle. But Johor has a new industry booming: data centers to drive generative AI, with microsoft commit more than 2 billion dollars precisely to a data center of this type. For technology giants, electricity has become the new oil. A next-generation AI data center could need 90 MW, enough to power tens of thousands of American homes. With the proliferation of AI applications, from chatbots to AI agents, the needs are increasing. An industrial consortium is planning data centers that will require 10 GW (more than a hundred times the demand of the current largest). Ensuring cheap and reliable energy is now as crucial for technology companies as silicon chips.

In 2025, big technology companies will scour the world in search of kilowatts, megawatts and gigawatts. In board meetings, discussions about server capacity are increasingly overshadowed by discussions about network capacity and the energy future. Nations blessed with abundant low-cost energy are taking advantage of this new advantage and crafting policies to attract investment in AI with the enthusiasm once reserved for manufacturing.

Regions that have historically won the data center prize, such as Ireland and Singapore, have seen their capacity stretched to the limit before the rise of GenAI. This has created opportunities for unlikely competitors, not only Malaysia but also Indonesia, Thailand, Vietnam and Chile. Latency is less important than maintaining electron flow.

Low-cost energy has long been a priority for companies: just as companies in the past located their refineries near ports and their factories near coal mines, artificial intelligence companies are trying to position themselves near where they can get electricity constantly and at a good price. prices.

Location ultimately does matter. Half of the energy costs in a data center typically come from running cooling and air conditioning systems to prevent servers from overheating. Colder climates or coastal areas will begin to be more in demand as potential sites.

This attraction to offering AI is so powerful that big tech companies are buying dirty energy to counter it, endangering their own and local economies. decarbonization targets at risk.

Countries compete fiercely for data center business. Tax breaks are popular: More than half of US states (including Arizona, New York and Texas) offer operators some form of tax breaks and even preferential rates for purchasing land and committing to energy access. In Malaysia, Green Lane Pathway initiatives accelerate construction approvals, eliminating bureaucracy to speed construction (and power lines) of data centers. Data regulation concessions to allow information to flow freely.

This interaction between watts and algorithms is redesigning the global influence map. It is a change as profound as the oil boom of the 20th century, but much less visible. No pipelines are being built nor are any oil tankers changing course. Instead, nondescript warehouses packed with servers are becoming the new geopolitical flashpoints.

It is unclear to what extent this changes global influence. The real AI research, where breakthroughs occur, will remain in research centers in San Francisco, London, Beijing and Paris. However, the data centers that bring these algorithms to market will be a low-margin, high-accrual, cheap-sell business.

This electrodiplomacy will be a key pillar for the coming years. Scaling AI is less about algorithms and more about electronics.

However, nations taking advantage of this moment should be cautious; Their advantage may prove fleeting as dominant economies figure out how to bring cheap, clean energy online in sufficient quantities to incentivize domestic housing.

For today’s energy-rich AI data center providers, the challenge lies in transforming this fleeting advantage into a sustainable advantage. They will need to go beyond attracting data centers and build their own durable innovation ecosystems that can thrive long after the “electric rush” subsides.