The AI Effect: Surging Stocks and Soaring Energy Demands

Estimated reading time: 3 minutes

Power & Profit

Artificial intelligence is reshaping industries in a manner reminiscent of the early years of the internet. This shift hasn’t gone unnoticed, especially on Wall Street.

The Nasdaq Composite, the tech-heaviest of the major U.S. stock indexes, has seen a notable upswing this year, predominantly fueled by the enthusiasm surrounding AI-related stocks, rising nearly 30% year-to-date.

However, this groundbreaking technological growth comes at a price: higher energy costs from increased demand.

The Energy Backbone

The root of AI’s energy demands lies in data centers.

These warehouses of servers and processing units, operated by the likes of Google (GOOGL), Microsoft (MSFT), and Amazon (AMZN) are massive energy consumers, which is why access to the power grid is a huge factor for data centers. For reference, research from the University of Washington found the energy used by a day’s worth of ChatGPT inquiries is comparable to the daily consumption of 33,000 U.S. households.

Carbon Neutral AI

Data center energy usage has increased by 25% per year between 2015 and 2021, before the surge in popularity for ChatGPT. In a world where energy is a huge factor in inflation, and companies attempt to go net-zero on emissions, this matters.

Major cloud providers, including Google Cloud, Microsoft Azure, and Amazon Web Services, are countering this by increasing renewable energy investments. Microsoft’s Azure aims to be carbon-negative by 2030, while Amazon and Google target 100% renewable operations by 2025 and 2030, respectively.

The ascent of AI brings both costs and opportunities. As always, success for companies and investors alike lies in finding the right balance between the two.

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