Tech Giants Bet Big on Natural Gas, FOMO May Be Their Downfall

The AI bubble is driving a mad dash to secure natural gas supplies and equipment, but at what cost?

The AI bubble is the big daddy of them all. Its first offspring — the rush to lock down power for data centers — is now begetting a mad dash to secure natural gas supplies and equipment. If FOMOs could have babies, then the AI bubble is already having grandkids. Microsoft, Google, and Meta are just a few of the tech giants investing heavily in natural gas power plants to fuel their data centers.

• Microsoft is working with Chevron and Engine No. 1 to build a natural gas power plant in West Texas that could grow to produce 5 gigawatts of electricity.
• Google is working with Crusoe to build a 933 MW natural gas power plant in North Texas.
• Meta is adding another seven natural gas power plants to its Hyperion data center in Louisiana, bringing the site to 7.46 GW of capacity.

The scramble for natural gas has led to a shortage of turbines for the power plants, with prices likely to rise 195% by the end of this year relative to 2019 prices, according to Wood Mackenzie. The equipment contributes 20% to 30% of the cost of a power plant. Companies won't be able to place new orders until 2028, and it's taking six years to get turbines delivered, the consultancy notes.

"The AI rush has illustrated just how physically constrained the digital world remains. Does it make sense for them to bet big on a finite resource?" - Tim De Chant

The tech giants' reliance on natural gas may come with unforeseen consequences, including price swings and grid strain. Natural gas supplies in the U.S. are plentiful, but shipping the fuel isn't cheap, and the country remains somewhat insulated from the turmoil in the Middle East. However, supplies aren't unlimited, and recently, growth in production in the big three regions — responsible for three-quarters of all U.S. shale gas production — has slowed considerably.

• The U.S. Geological Survey estimated that there's enough natural gas in one region to supply energy to the entire United States for 10 months by itself.
• Tech companies might be able to shield themselves from scrutiny for a bit by moving their gas power plants behind the meter — by skipping the grid and connecting them directly to their data centers.
• However, natural gas isn't an unlimited resource, and if their ambitions grow too big, even the behind-the-meter operations could drive up power prices for everyone.

The AI rush has illustrated just how physically constrained the digital world remains. Does it make sense for tech companies to bet big on a finite resource? Perhaps they'll come to regret their FOMO.