The surging demand for artificial intelligence and cloud computing is fueling an unprecedented expansion of data centers, triggering warnings about looming strains on America's power grid.
New Data From McKinsey & Co. Shares Light On Energy Consumption
Data centers now account for a record 5% of total U.S. electricity demand, according to a post on Tuesday from The Kobeissi Letter on X, formerly Twitter.
The commentary cited McKinsey & Co. estimates showing that this share could more than double within five years, with data centers expected to drive up to 40% of all new electricity demand through 2030.
"Energy will soon be the AI bottleneck," The Kobeissi Letter warned, pointing to a compounded annual growth rate of more than 23% in data center power needs through the end of the decade.
$6.7 Trillion Global Buildout Underway
In an Aug. 8 report, McKinsey projected nearly $7 trillion in global capital spending on data center infrastructure by 2030, with more than 40% of that in the U.S.
Roughly $4 trillion will be spent on computing hardware, with the remainder going toward real estate, energy infrastructure and other needs.
States like Northern Virginia have already leveraged targeted tax incentives and infrastructure upgrades to become digital infrastructure hubs, accounting for 13% of the world's data center capacity, the report said.
AI And Hyperscalers Like Microsoft, Google Are Driving The Surge
McKinsey's analysis attributes about 40% of projected demand growth to AI and high-performance computing. Hyperscalers such as Amazon.com, Inc.'s (NASDAQ:AMZN) Web Services, Microsoft Corporation's (NASDAQ:MSFT) Azure and Alphabet Inc.'s (NASDAQ:GOOG) (NASDAQ:GOOGL) Google Cloud are investing billions in large-scale campuses to handle the increased workloads.
Google, for example, reportedly plans to build a $6 billion, 1-gigawatt data center in Visakhapatnam, India, with $2 billion allocated for green energy capacity to power the facility.
Risks To Power Supply And Resources
The U.S. Energy Information Administration expects record-breaking electricity consumption in 2025 and 2026, while ICF International projects overall demand could grow 25% by 2030.
McKinsey warns that U.S. data center power needs could add about 460 terawatt-hours of demand by 2030 — triple current consumption levels.
Beyond electricity, water usage for cooling is expected to rise 170% by 2030, raising environmental concerns. Industry experts caution that resource shortages, infrastructure delays and public opposition could slow projects or increase costs.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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