AI Boom Hits Hard Physical Limits, Experts Warn of Supply Constraints and Energy Crisis

The AI industry is facing hard physical limits, with experts warning of supply constraints and an energy crisis as the AI boom continues to accelerate.

Experts Warn of Supply Constraints and Energy Crisis

Five experts in the AI industry recently spoke at the Milken Global Conference in Beverly Hills, where they discussed the challenges facing the industry. Christophe Fouquet, CEO of ASML, described the "huge acceleration of chips manufacturing," but expressed his "strong belief" that despite all that effort, "for the next two, three, maybe five years, the market will be supply limited." Francis deSouza, COO of Google Cloud, highlighted the big issue of chip shortages, reminding the audience that Google Cloud's revenue crossed $20 billion last quarter, growing 63%, while its backlog — the committed but not yet delivered revenue — nearly doubled in a single quarter, from $250 billion to $460 billion.

Energy Crisis Looming

If chips are the first bottleneck, energy is the one looming behind it. DeSouza confirmed that Google is exploring data centers in space as a serious response to energy constraints. "You get access to more abundant energy," he noted. Of course, even in orbit, it isn't simple. DeSouza observed space is a vacuum, so eliminates convection, leaving radiation as the only way to shed heat into the surrounding environment (a much slower and harder-to-engineer process than the air and liquid cooling systems that data centers rely on today).

Alternative Architecture

While the rest of the industry debates scale, architecture, and inference efficiency within the large language model paradigm, Eve Bodnia is building something very different. Her company, Logical Intelligence, is built on so-called energy-based models (EBMs), a class of AI that doesn't predict the next token in a sequence but instead attempts to understand the rules underlying data, in a way she argues is closer to how the human brain actually works.

Geopolitical Implications

Qasar Younis, co-founder and CEO of Applied Intuition, offered what may have been the panel's most geopolitically charged observation, which is that physical AI and national sovereignty are entangled in ways that purely digital AI never was. Autonomous vehicles, defense drones, mining equipment, agricultural machines — these manifest in the real world in ways governments can't ignore, raising questions about safety, data collection, and who ultimately controls systems that operate inside a nation's borders.

Optimistic Views

Near the end of our panel, someone in the audience asked the obvious uncomfortable question: is all of this going to impact the next generation's capacity for critical thinking? The answers were optimistic, as you'd expect from people who've staked their careers on this technology. DeSouza immediately pointed to the scale of problems that more powerful tools might finally let humanity address. Think neurological diseases whose biological mechanisms we don't yet understand, greenhouse gas removal, and grid infrastructure that has been deferred for decades.