The energy play when the aI shakeout begins

By David Callaway  •  August 27, 2025

Last week’s tech stock climbdown on AI concerns, while brief, gave us enough pause to consider what will happen when the real AI shakeout finally happens. When it becomes clear that not every company is going to win the AI race, and that not every energy company roped in to power data centers is going to reap riches.

As we move into September and October, the most volatile times of the year in markets, and ahead of Nvidia’s NVDA -0.02%↓ earnings Wednesday, it is worth reflection, especially after three years of sweeping gains for any company with an AI story to tell.

The situation is different from the internet bubble 25 years ago, when hundreds of companies claiming to be changing the future were simply buying each other’s advertising and self-perpetuating the frenzy. AI and its profits are real, and the data centers sprouting around the world are indeed sucking up unprecedented amounts of energy, both fossil fuel and renewables.

But aside from a few large energy companies, such as GE Vernova GEV -0.14%↓ and Constellation Energy CEG 0.09%↑, most renewable energy companies, and certainly fossil fuel firms, haven’t felt the investor love. That’s despite the White House-led rush to fossil fuels and the sudden proclamations among tech leaders that oil and gas are needed now because data center needs are now and renewables might take too long.

Fossil fuels especially are at risk. Our friend and climate colleague, Peter McCillop at Climate and Capital Media, likened fossil fuels to the subprime mortgages of the Great Financial Crisis era almost 20 years ago, in an excellent column this past weekend. He argued that tech and financial companies are ignoring the market fundamentals that show renewable energy is cheaper than fossil fuels to blindly chase returns on fossil fuels because the prevailing political winds are telling them the AI race must be won now.

We might not go that far. But we do see an AI reset almost certainly coming, and with it a shakeout in the “all things energy” story that has accompanied it. At that point, it will become clear that despite the claims of the White House, the market will choose renewable energy not because it helps with climate change, but simply because it is cheaper. Winners and losers among the tech giants will fall along the lines of who stuck with renewables and who abandoned them in the past year.

That only leaves the questions of when the shakeout might come, and of course, how long it will last.

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