The Energy Hunger of AI Data Centers
The global tech industry is undergoing a seismic shift, driven by the insatiable energy demands of AI data centers. On the southern tip of Malaysia, the state of Johor is emerging as a key player in this energy race. Known for its scenic beaches and lush jungles, Johor is now witnessing a boom in data center investments. Microsoft, for instance, has pledged over $2 billion to establish a cutting-edge AI data center in the region.
These centers require immense power, with one AI data center consuming up to 90 megawatts—enough to supply tens of thousands of American homes. Industry projections suggest that future facilities will demand even more, with some planning for capacities of up to 10 gigawatts. For tech giants, securing cheap and reliable energy has become as pivotal as acquiring advanced silicon chips.
Global Competition for Low-Cost Energy
In 2025, major technology firms will intensify their search for affordable energy sources worldwide. Boardroom discussions are increasingly dominated by concerns over grid capacity and energy futures. Countries endowed with abundant, inexpensive energy are leveraging this advantage to attract AI investments, much like they once did for manufacturing industries.
Traditional hubs like Ireland and Singapore, which historically dominated the data center landscape, are now struggling to keep up with the growing demands of generative AI. This has opened doors for emerging players such as Indonesia, Thailand, Vietnam, and Chile, where governments are implementing policies to entice AI-related projects. In Malaysia, initiatives like the Green Lane Pathway are expediting construction approvals and ensuring swift access to energy infrastructure.
The Role of Location and Climate
The geographic location of data centers plays a critical role in operational costs. Approximately half of the energy expenses in a data center are attributed to cooling systems that prevent servers from overheating. As a result, cooler climates and coastal regions are becoming increasingly sought after as ideal locations for these facilities.
Much like the industrial strategies of the past—where factories were built near coal mines or refineries near ports—AI companies are now positioning their operations close to dependable and cost-effective energy sources. This strategic alignment is reshaping the global map of influence, as nations compete to house these energy-intensive hubs.
The Geopolitical Impact of Energy-Driven AI Expansion
This new era of “electro-diplomacy” is redefining global power dynamics. Unlike the visible infrastructure of the 20th-century oil boom, such as pipelines and tankers, the modern energy race is centered around inconspicuous warehouses filled with servers. These facilities are becoming the backbone of AI-driven economies, but their impact on global influence is nuanced.
While research hubs in cities like San Francisco, London, Beijing, and Paris will continue to drive AI innovation, the data centers that commercialize these technologies operate on low margins. This makes them highly dependent on cheap energy and favorable government policies. Nations that seize this opportunity must, however, be cautious. Their advantage may be short-lived if dominant economies manage to produce clean, affordable energy domestically.
Ensuring Long-Term Sustainability
For energy-rich nations hosting AI data centers, the challenge lies in transforming their current advantage into a sustainable future. This requires building robust innovation ecosystems that extend beyond merely attracting data centers. As the initial “electricity rush” subsides, these countries must focus on fostering long-term technological and economic growth.
Alternatively, the sustainability of AI advancements is also under scrutiny. The growing energy demands of AI systems could potentially derail decarbonization targets, as some companies resort to using non-renewable energy sources to meet their needs. This raises pressing questions about the balance between innovation and environmental responsibility, a topic that resonates across industries, including discussions around balancing AI efficiency with sustainability goals.
The Future of Energy and AI
As AI continues its rapid expansion, the interplay between energy and technology will shape the global economy in unprecedented ways. Governments, tech companies, and energy providers must collaborate to ensure this growth is both sustainable and equitable. The race for cheap energy may be the defining story of the AI revolution, but its long-term success hinges on innovation that benefits both industry and society.