This sounds like the plot of a sci-fi novel: a revolutionary technology so powerful that running it consumes as much electricity as an entire nation. As a result, this new energy demand reshapes global markets and drives unprecedented growth.
But it isn’t science fiction. It’s reality.
It’s the impact of artificial intelligence (AI) on the global energy market.
The global markets are riding high right now, with many sectors reaching all-time highs. Energy is one of the sectors leading the charge, and even niche areas like cryptocurrency are posting huge returns.
As AI continues to evolve and permeate every aspect of our lives, its energy footprint is becoming increasingly significant. Investors, traders, and analysts are now grappling with a new reality where the success of AI-driven companies and the growth of the technology itself are becoming intimately tied to the availability and cost of energy.
A Bull Market Breakdown
It’s no secret that we’re in a full-swing bull market. Even in the more speculative realm, assets are absolutely on fire. For instance, cryptocurrency shot up 36% over the last 26 weeks and is up a staggering 195% over the past year.
However, the energy sector is leading the charge. There has been a heavy interest in clean energy over the last several years, and investment in the clean energy supply chain could rise to $259 billion globally by 2025. As a result, the clean energy sector is currently up 7% for the quarter, and we’re seeing significant activity around sources like wind and solar — projected to more than double by 2028. In fact, wind and solar have recently experienced double-digit quarterly gains.
However, despite this news, nuclear and uranium are currently showing the strongest returns by far — they’re up 42% and 40%, respectively, over the past 52 weeks. We’re seeing extended licenses for old nuclear reactors and the construction of new reactors, increasing the profitability of related stocks and ETFs. The price of uranium has experienced a substantial increase, with physical uranium returning nearly 90% in 2023 and rising to $106 per pound — an increase of 16.5% — earlier this year.
But the energy sector is booming across the board. Natural gas, for instance, is up 35% for the year. Yet, while crude oil is up almost 17%, gasoline is down nearly 4%, which means the actual commodity isn’t leading this charge.
This indicates a pure demand for energy not relative to the price of the underlying commodity.
While factors like climate change and geopolitical conflicts have also renewed global interest in clean energy, a holistic view of the data we have today shows that AI shares responsibility for this energy boom.
AI: The Energy of a Nation
Training a language learning model (LLM) like OpenAI’s ChatGPT uses 1,287 megawatt-hours of electricity, the annual consumption of roughly 130 homes in the United States. The International Energy Agency (IEA) recently projected that by 2026, the combined electricity consumption associated with data centers, cryptocurrency, and artificial intelligence (AI) could hit 4% of global energy demand — the same amount of electricity used by Japan.
Given that an AI search query, such as one made by ChatGPT, requires almost 10x more electricity to process than a traditional Google search, it’s no wonder that AI is also projected to drive a 160% increase in data center power demand — an already important element for mining cryptocurrency. To match the rise in demand, the United States alone will require as much as an additional 8.5 billion cubic feet per day of natural gas. For context, in 2023, the United States produced 104 billion cubic feet of natural gas per day.
According to a Stanford study, the world’s oil reserves may run out by 2052, natural gas by 2060, and coal by 2090. While estimations like these vary, there is no question why companies and governments are investing in renewable, clean energy sources. So, while AI is increasing energy demand, it may also help optimize and enhance renewable, clean sources. Due to private and public investments in renewable energy, the global AI renewable energy market is expected to surpass $114.87 billion by 2032.
Clearly, the worldwide, multi-pronged integration of AI into various industries is amplifying energy demand and will continue to do so for the foreseeable future. According to a recent report, AI in the energy and power market is projected to grow at a CAGR of 24.68% from a market valuation that was $3.103 billion in 2021 to $14.527 billion in 2028. This makes AI a crucial factor in future energy policies and investment decisions. Moving forward, balancing AI’s benefits with its significant energy requirements will certainly be a central focus of the global energy market.
Investing in the Future of Energy
The rise of AI as a major energy consumer represents a profound shift in the way we understand and approach energy production and consumption. AI’s energy footprint will continue to grow, presenting challenges and opportunities for investors paying attention to the global energy market.
The increasing energy demand driven by AI is already putting pressure on our existing energy infrastructure and requires significant investments. Countries and companies are already prioritizing the development of clean energy solutions to meet this demand sustainably, making these sectors crucial to watch.
Savvy investors should stay attuned to the evolving relationship between AI and energy. Those who can track the market’s many interlinked factors will be best positioned to thrive. The rise of AI is not just a technological revolution but a transformative force that will reshape the global energy market for years to come.
