Released March 07, 2025 | SUGAR LAND
en
Written by Paul Wiseman for Industrial Info Resources (Sugar Land, Texas)--Is the tech rush slowing down? Will Chinese artificial intelligence (AI) upstart DeepSeek take market share from U.S. AI firms, slowing their frantic growth? If so, how will that affect the associated expansion of the power grid?
Late last month, Reuters quoted investment bank TD Cowen as reporting that Microsoft Corporation (NASDAQ:MSFT) (Redmond, Washington) had cancelled leases for about 200 megawatts (MW) worth of data centers with "at least two private data center operators." Cowan's researchers added that Meta Platforms Incorporated (NASDAQ:META) (Menlo Park, California) and others also have recently made moves to reduce capital expenditures.
The frantic buildout of data centers in recent years has caused some investors to wonder whether it was all too much, too fast, and recent dial-backs by data firms have added to that concern. Microsoft, however, has stated that it is still committed to spending it announced $80 billion on AI and cloud capacity in this fiscal year, according to Reuters.
Removing more fuel from the expansion fire was the late January release of China-based DeepSeek, which announced that it was using cheaper, quicker and less powerful chips than those employed by U.S. providers. According to Guinness Global Investments, that announcement shocked the marketplace, "wiping out nearly a trillion dollars in U.S. technology value and causing (chip maker) NVIDIA (NASDAQ:NVDA) (Santa Clara, California) to lose close to $600 billion in market cap, the largest single-day loss in history." Investors were worried that the cheaper Chinese chips would erode NVIDIA demand.
Some of those losses have since been recovered, but investors are much more wary about data centers' continued growth than they were before.
Does that mean the parallel growth of demand on the power grid is also off the table? Slower growth does not mean no growth, and some experts note that there's still not a real handle on how much power will be needed, regardless of the exact rate of data center expansion.
On the other hand, President Donald Trump's tariffs may help steady the rise, by getting at least a start on his desired outcome of bringing jobs to the U.S. from overseas. Apple Incorporated (NASDAQ:AAPL) (Cupertino, California) announced plans in February to invest $500 billion in the U.S. over the next four years (the length of the current administration's term) to build new AI servers and to hire 20,000 workers.
An Apple company release said the money will go toward expanding the workforce and facilities in Michigan, Texas, California, Arizona, Nevada, Iowa, Oregon, North Carolina and Washington. Apple currently produces most of its products in China, and Trump's plan to add a new tariff on Chinese imports may have influenced this decision.
The future's uncertainty may further challenge power utilities' planning. Canary Media recently said that "utilities are flying blind on data center demand." Canary Media quoted computing/power use expert Jonathan Koomey as saying that utilities are pressured to spend billions on infrastructure to serve new data centers. The problem is that many more data centers may be planned than actually get built.
To stay in the black financially, utilities must be assured that new assets will have enough demand to pay for themselves in additional revenue. Koomey said that the DeepSeek model of making data centers vastly more efficient also could cause an overbuild, even if all planned centers are put in service, leaving utilities holding the bag for unused capacity.
An increasing number of utilities are asking data-center giants to provide their own power--with some to spare for the grid. This would shift much of the investment and planning burden to the end users, while benefiting the utility and the people who depend on it.
This requirement could benefit the grid in other ways, especially for those living near data centers, as those residents may be experiencing unusual problems with electronics and appliances. As quoted by Hydrogen Fuel News: "A study from Whisker Labs' Ting Sensor Network revealed that urban areas with high data center density, such as Chicago, experience total harmonic distortion (THD) levels above sustainable thresholds. These elevated levels directly impact households by reducing the efficiency of essential devices like refrigerators and washing machines."
Data-center loads are non-linear, and those fluctuations may cause load changes that induce harmonic distortions. These distortions can cause issues for nearby electronics and appliances.
However, a spokesperson for the Chicago utility involved in the study, Commonwealth Edison, told Bloomberg that it "strongly questions the accuracy and underlying assumptions of Whisker Labs' claims."
Overall, it would seem that the growth of data centers and their power needs is still on the table--but at what rate is the question that must be resolved by utilities in the U.S. and elsewhere.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).
Late last month, Reuters quoted investment bank TD Cowen as reporting that Microsoft Corporation (NASDAQ:MSFT) (Redmond, Washington) had cancelled leases for about 200 megawatts (MW) worth of data centers with "at least two private data center operators." Cowan's researchers added that Meta Platforms Incorporated (NASDAQ:META) (Menlo Park, California) and others also have recently made moves to reduce capital expenditures.
The frantic buildout of data centers in recent years has caused some investors to wonder whether it was all too much, too fast, and recent dial-backs by data firms have added to that concern. Microsoft, however, has stated that it is still committed to spending it announced $80 billion on AI and cloud capacity in this fiscal year, according to Reuters.
Removing more fuel from the expansion fire was the late January release of China-based DeepSeek, which announced that it was using cheaper, quicker and less powerful chips than those employed by U.S. providers. According to Guinness Global Investments, that announcement shocked the marketplace, "wiping out nearly a trillion dollars in U.S. technology value and causing (chip maker) NVIDIA (NASDAQ:NVDA) (Santa Clara, California) to lose close to $600 billion in market cap, the largest single-day loss in history." Investors were worried that the cheaper Chinese chips would erode NVIDIA demand.
Some of those losses have since been recovered, but investors are much more wary about data centers' continued growth than they were before.
Does that mean the parallel growth of demand on the power grid is also off the table? Slower growth does not mean no growth, and some experts note that there's still not a real handle on how much power will be needed, regardless of the exact rate of data center expansion.
On the other hand, President Donald Trump's tariffs may help steady the rise, by getting at least a start on his desired outcome of bringing jobs to the U.S. from overseas. Apple Incorporated (NASDAQ:AAPL) (Cupertino, California) announced plans in February to invest $500 billion in the U.S. over the next four years (the length of the current administration's term) to build new AI servers and to hire 20,000 workers.
An Apple company release said the money will go toward expanding the workforce and facilities in Michigan, Texas, California, Arizona, Nevada, Iowa, Oregon, North Carolina and Washington. Apple currently produces most of its products in China, and Trump's plan to add a new tariff on Chinese imports may have influenced this decision.
The future's uncertainty may further challenge power utilities' planning. Canary Media recently said that "utilities are flying blind on data center demand." Canary Media quoted computing/power use expert Jonathan Koomey as saying that utilities are pressured to spend billions on infrastructure to serve new data centers. The problem is that many more data centers may be planned than actually get built.
To stay in the black financially, utilities must be assured that new assets will have enough demand to pay for themselves in additional revenue. Koomey said that the DeepSeek model of making data centers vastly more efficient also could cause an overbuild, even if all planned centers are put in service, leaving utilities holding the bag for unused capacity.
An increasing number of utilities are asking data-center giants to provide their own power--with some to spare for the grid. This would shift much of the investment and planning burden to the end users, while benefiting the utility and the people who depend on it.
This requirement could benefit the grid in other ways, especially for those living near data centers, as those residents may be experiencing unusual problems with electronics and appliances. As quoted by Hydrogen Fuel News: "A study from Whisker Labs' Ting Sensor Network revealed that urban areas with high data center density, such as Chicago, experience total harmonic distortion (THD) levels above sustainable thresholds. These elevated levels directly impact households by reducing the efficiency of essential devices like refrigerators and washing machines."
Data-center loads are non-linear, and those fluctuations may cause load changes that induce harmonic distortions. These distortions can cause issues for nearby electronics and appliances.
However, a spokesperson for the Chicago utility involved in the study, Commonwealth Edison, told Bloomberg that it "strongly questions the accuracy and underlying assumptions of Whisker Labs' claims."
Overall, it would seem that the growth of data centers and their power needs is still on the table--but at what rate is the question that must be resolved by utilities in the U.S. and elsewhere.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).
