The best investment in AI may be in energy technology

Venture capitalists have been placing increasingly bigger bets on AI startups and investing More than half a trillion dollars in this sector during the past five years.

But these days, the smartest investment in AI may be in energy, According to For a report by Sightline Climate. Researchers found that up to 50% of announced data center projects may be delayed. One of the biggest culprits is access to power.

Of the 190 gigawatts worth of data centers the company is tracking, only 5 gigawatts are under construction. About 6 gigawatts of data center projects were launched in Sightline’s online database last year. A much larger proportion – about 36% – saw their schedules reversed in 2025. The delays could eventually spread and affect large enterprises and other companies that use AI in their business.

This pressure between supply and demand represents an opportunity for investors. This is why.

Big technology companies such as Google and Meta have allocated large portions of their balance sheets to developing solar, wind, and nuclear energy projects. These companies also support emerging technologies such as Form Energy battery that lasts 100 hours Through direct investments and working with utilities to accelerate adoption.

Dozens of startups are pursuing technologies that address the energy problem. For example, Amperesand, DG Matrix and Heron Power are being developed New energy conversion technologieswhile companies like Camus, GridBeyond, and Texture are as well Construction programs It can manage the flow of electrons.

Power remains one of the most significant constraints facing data centers, a deficit that is unlikely to change anytime soon. Artificial intelligence is expected to increase energy consumption in data centers by 175% by 2030. According to To Goldman Sachs.

This grid shortage is unprecedented in modern times, and has led to soaring electricity prices across the country. This has prompted many technology companies to explore alternative ways to operate their data centers. (The Trump administration, sensing a looming political crisis, is just as well Motivate technology companies To build their own energy source, pay higher prices, or both. Most of them had already made plans to do so, of course.)

Network alternatives

Amazon, Google, Oracle, and other major technology companies are working to reduce their dependence on the network. Many data centers are planned using on-site power or a hybrid approach that mixes on-site power with grid connectivity.

The largest data centers are leading the charge. Less than a quarter of projects that specified an energy source would use on-site or hybrid; Together they represent 44% of total capacity.

This shift was driven in part by a shortage of power generation equipment – ​​i.e Gas turbines – And an old network. This opened the way for alternative energy sources.

Google’s latest deal to operate a new data center in Minnesota shows one way to address the problem. The company will Blending wind and solar energy with a massive 30 GWh battery From the energy model. Google also worked with Xcel Energy to establish a new pricing structure that it says will help encourage the adoption of new technologies in the utility planning process.

The Form Energy battery is not the only example. Grid-scale batteries are poised to take a significant share of the energy market. By the end of this year, the United States should have approximately 65 gigawatts of battery storage capacity, According to To the US Energy Information Administration. Like many of its peers, Form Energy is looking to capitalize on the momentum Raised a $500 million round Before the final IPO.

Underrated technology

Power supplies are only part of the story. Once power reaches the grid or data center, it must be managed, a task that often falls to the humble transformer.

Most current transformers use huge blocks of iron wrapped with copper wire, a technology that is about 140 years old. They are reliable, but have become very bulky as the demand for data center power increases. By the time the power density of server racks reaches 1 megawatt, the power equipment needed to run them will take up twice the space of the rack itself, one expert told TechCrunch.

That’s why investors They flock to support startups in the field of solid-state converters Recently, which hopes that silicon-based power electronics will replace older iron and copper technology. They are more expensive than existing switches, but they are also flexible enough to replace multiple pieces of equipment in a data center, making them cost competitive.

Overall, the amount of investments in battery and inverter companies has been much smaller than some of the successful rounds we have seen in the AI ​​industry.

This is not a bad thing – these rounds are more accessible to investors. Additionally, as the world electrifies everything from transportation to heavy industry, the need for energy will grow, giving investors a hedge against the collapse of artificial intelligence. Perhaps the best investment in AI is not in AI at all.