A Bloomberg article recently concluded that “more than two-thirds of the electricity sought for the Artificial Intelligence boom in the US isn’t likely to materialize due to ‘phantom’ projects and long-shot pitches.” Let’s talk about what that means for AI stocks and SpaceX (SPCX), says Eoin Treacy, editor of Fuller Treacy Money.
The article cited projections from Wood Mackenzie. The firm found that US grid operators and utilities will likely only commit to about 28% of the 1,066 gigawatts requested for data center projects.
SpaceX (SPCX)
My view? The approach to Treasury bond auctions is to submit orders for more than you need in the hope of getting the allocation you want. When that does not work, it is generally referred to as a failed auction.
The same process unfolds in popular IPOs. Investors have to bid for significantly more shares than they think they are likely to receive.
It certainly appears likely that the same process is underway in the data center buildout. It is much better to secure the promise of a connection to the electricity grid and to then secure land, build, and populate a data center. Without electricity, nothing works.
But it is impossible to build the electricity-generating capacity to serve the posted demands of the AI sector. It helps that a significant proportion are speculating on being able to build rather than having serious plans.
When even Texas is pulling back from approving electricity connections, the sector is going through a reality check. That is the primary bullish rationale for the possibility of data centers in space - and that is assuming it is even possible.
SPCX stock is holding its recent gains regardless. But the outlook continues to heavily depend on the success of the Starship rocket.
