If You’re an AI Bull, Keep an Eye on Uranium

AI can do anything. It’s going to transform the global economy. It’s going to give us the productivity boom we have awaited for so long – and in doing all our boring jobs, give us the leisure time economists predicted we would have decades ago. It’s going to save lives through early diagnoses by “smelling” the chemicals associated with diabetes and cancer. It will drive our autonomous cars, predict and prevent flight delays, design new types of climate-resistant rice and possibly even do the one thing that no amount of money or actual people has yet been able to do – save the UK’s National Health Service. The list is endless. But you get the idea. By next year, says Elon Musk on his X, “AI will probably be smarter than any single human. By 2029 AI is probably smarter than all humans combined.”

But here’s the catch: AI isn’t magic. It can’t perform its miracles — or do anything — without electricity; lots and lots of electricity. No one is entirely sure how much, but a much quoted recent estimate comes in at around the same as Sweden uses each year or 0.5% of total world electricity use. Another way to get a sense of the scale is to look at the size of data centers. According to the latest data center report from the commercial-property firm JLL, it is “not uncommon” for developers today to announce new-build data centers with 10 times the load of only a few years ago.

So while we can’t say exactly how much electricity AI will take, we do know it’s going to require a lot more generation and transmission capacity. That’s particularly the case given the other two shifts underway – the attempt to green the grid with renewable energy and the effort to electrify more and more energy use in order to green that too. The European Union expects demand for electricity to rise 60% by 2030.

That capacity doesn’t yet exist. US electricity generation has been more or less flat since the early 2000s for example. This, says JP Morgan Asset Management’s Michael Cembalest in a recent report, hasn’t been much of a big deal: “The energy needs of a growing population have been offset by improving energy efficiency.” However, the arrival of AI, with its ever-expanding list of potentially life-changing applications, its unexpectedly rapid adoption — ChatGPT became the fastest growing app in internet history — and its rapacious demand for energy changes that. Now it is a big deal.