China’s Limitless Electricity Gives AI Lead
China and the U.S. are in a race for AI supremacy. Recently, OpenAI CEO Sam Altman said there was no reason to think the U.S is ahead. Nvidia CEO Jensen Huang has said the same. The next stage of the AI competition will be electricity wars. China has a huge and vast advantage.
AI server farms could take up 20% of the total electricity capacity by the end of the decade. This will cause a litany of problems as residential customers compete with tech companies for supply. Rates will rise. This will lead to political fighting over the issues that have already begun. The battle will move to one between voters and tech lobbyists.
China does not have these problems. First, there is no voting and lobbying. The central government can constrain electricity supply and strategically manage generation. However, it does not need to. China has a limitless supply of electricity for its current needs and almost any need forecast for the future.
China Overcapacity
Fortune recently reported, “The country’s reserve margin has never dipped below 80%–100% nationwide, meaning it has consistently maintained at least twice the capacity it needs.” Its grid and supply means expansion of data centers does not create a problem.
Even if China’s AI development is behind the U.S. benchmark, AI products are only as good as to the extent they can be deployed. It is estimated that major tech companies will spend $350 billion on AI server farms this year. Private equity and private credit companies will put in more. However, unless there is a remarkably sharp rise in nuclear, solar, and wind energy, they will have less and less chance to buy energy. China does not have that problem.
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