The next phase of the AI race may well be about power supply more than models and chips

Data-centre investments hint at a shift in the AI race. Soon, reliable and affordable electricity will confer a decisive advantage in this sector.

As Albert O. Hirschman argued in National Power and the Structure of Foreign Trade, an economy’s true power lies in its ability to manage the choke points that affect its industries.

In the AI ecosystem, the US has been leveraging its dominance in chip design by strategically limiting exports to China, while Beijing has exerted pressure on the US through its control of rare-earth materials needed to make chips, magnets and other components of advanced technology.But as the scale of the AI industry and its reliance on computing power grows, the bottleneck will move from chips to electricity because all the data centres in the world will not help if they lack a continuous supply of affordable energy. The International Energy Agency estimates that roughly 20% of planned global data-centre capacity will be at risk by 2030, owing to grid bottlenecks and interconnection queues.

And as energy supplies are constrained, costs will rise, eventually trickling down to households and firms.Which country will dominate this next leg of the race? China has certainly made a statement with its massive build-out of energy supply and distribution infrastructure, much of which focuses on renewables. According to the Financial Times, Chinese investments in clean energy cover everything from solar and hydropower to the hardware needed to move cheaper inland power to coastal demand centres, thereby lowering costs and improving reliability.

China has also invested massively in manufacturing, driving down the price of a solar panel by a factor of 20. All told, it is now capable of adding between 500