As we have been writing for the better part of the last year, the next AI trade continues to look like it's going to be energy. And now, both BlackRock and Microsoft are making it known that they understand this, too.
Yesterday it was reported that the two industry giants are prepping the launch of a $30 billion AI investment fund that'll see Microsoft build data centers and energy projects to meet the demands of AI, according to the Financial Times.
BlackRock’s new infrastructure investment unit, Global Infrastructure Partners, is launching a major investment fund with Microsoft and Abu Dhabi’s MGX as general partners. Nvidia will provide advisory on factory design and integration.
The FT wrote that the partnership aims to tackle the massive power and infrastructure needs of AI development, which is expected to strain current energy systems. AI’s computing demands far exceed past technologies.
The partnership seeks to raise up to $30bn in equity, with plans to leverage an additional $70bn in debt.
In a statement, Larry Fink said: “Mobilizing private capital to build AI infrastructure like data centers and power will unlock a multitrillion-dollar long-term investment opportunity.”
Brad Smith, Microsoft’s president, added: “The country and the world are going to need more capital investment to accelerate the development of the AI infrastructure needed. This kind of effort is an important step.”
Jensen Huang of Nvidia added: “Accelerated computing and generative AI are driving a growing need for AI infrastructure for the next industrial revolution.”
The upcoming fund is the latest by a major asset manager to address the rising energy needs of generative AI and cloud computing. Earlier this year, Microsoft committed $10bn to renewable energy projects with Brookfield Asset Management and aims for 100% zero-carbon energy by 2030, the Financial Times concluded.
The International Energy Agency predicts global electricity consumption by data centers could exceed 1,000 terawatt-hours by 2026, more than double the 2022 level.
In the U.S., which houses a third of the world’s data centers, electricity demand is surging for the first time in 20 years. A report from Grid Strategies shows five-year electricity demand projections in the U.S. have nearly doubled, from 2.6% to 4.7%.
For those who missed it, in our note "The Next AI Trade" from April of this year, we outlined various investment opportunities for powering up America, most of which have dramatically outperformed the market.
A favorite name of ours has been the Sam Altman-backed Oklo, which we have highlighted as the potential solution to the extreme forthcoming demands in energy as a result of artificial intelligence. It makes nuclear power plants, ranging from 15 MWe to 50 MWe, utilizing liquid metal reactor technology, in soon-to-be everywhere small modular reactors.
