The rapid construction of AI data centers is creating a huge surge in electricity demand. This strains existing power grids, leading to higher energy prices for consumers and businesses, which represents a significant and underappreciated inflationary pressure.

The primary bottleneck for scaling AI over the next decade may be the difficulty of bringing gigawatt-scale power online to support data centers. Smart money is already focused on this challenge, which is more complex than silicon supply.

AI companies are building their own power plants due to slow utility responses. They overbuild for reliability, and this excess capacity will eventually be sold back to the grid, transforming them into desirable sources of cheap, local energy for communities within five years.

The insatiable demand for power from new data centers is so great that it's revitalizing America's dormant energy infrastructure. This has led to supply chain booms for turbines, creative solutions like using diesel truck engines for power, and even a doubling of wages for mobile electricians.

The U.S. has plenty of power for the AI boom, but it's in the wrong places—far from existing data centers, fiber networks, and population centers. The critical challenge is not generation capacity but rather bridging the geographical gap between where power is abundant and where it is needed.

Credit investors should look beyond direct AI companies. According to Victoria Fernandez, the massive infrastructure build-out for AI creates a significant tailwind for power and energy companies, offering a less crowded investment thesis with potentially wider spreads and strong fundamentals.

Contrary to the common focus on chip manufacturing, the immediate bottleneck for building new AI data centers is energy. Factors like power availability, grid interconnects, and high-voltage equipment are the true constraints, forcing companies to explore solutions like on-site power generation.

Soaring power consumption from AI is widening the "power spread"—the difference between the cost to generate electricity and its selling price. This projected 15% expansion in profit margins will significantly boost earnings for power generation companies, creating massive value across the supply chain.

The rapid build-out of data centers to power AI is consuming so much energy that it's creating a broad, national increase in electricity costs. This trend is now a noticeable factor contributing to CPI inflation and is expected to persist.