The AI Economy (Part 4) | AI's Impact on Energy, Infrastructure, Jobs and the Economy
In the first three parts of this series, we have looked at what artificial intelligence is, why investors are paying attention, and what history can teach us about investing during periods of technological excitement. However, the impact of artificial intelligence is not limited to the companies developing AI models, designing semiconductors, or building software. The technology requires enormous amounts of computing power, electricity, data centers, networking equipment, and other physical infrastructure. AI has also begun to shift the way that businesses operate from daily tasks to bigger picture ideas.
Like with all major technological advancements, there will be new opportunities created and ripple effects that could negatively impact certain industries and individuals. AI could increase productivity, encourage investment, and create entirely new industries. It could also put pressure on existing businesses, change the skills employers need, and eliminate some jobs.
The Infrastructure Behind AI
We hear a lot about the energy required to power artificial intelligence, but may not fully comprehend the sheer amount of infrastructure being built to support it.
The International Energy Agency estimates that global data center electricity consumption will more than double by 2030, reaching roughly 945 terawatt-hours. In the United States, data centers already accounted for about 4.4% of total electricity consumption in 2023, with the Department of Energy projecting that figure could reach 6.7% to 12% by 2028.
Companies are investing heavily in that infrastructure as they try to keep up with rapidly growing demand while facing significant pushback from the community. The impact extends well beyond the technology companies developing AI. Meeting that demand requires investment in power generation and transmission, data centers, semiconductor manufacturing, construction, and the equipment that connects and operates these facilities.
The Energy Challenge
Specifically looking at the energy sector, the growth in electricity demand could create opportunities for utilities, energy producers, grid operators, construction companies, and equipment manufacturers.
The International Energy Agency (IEA) expects renewable energy to supply a significant portion (about half of the growth in data center electricity demand through 2030) of the additional electricity needed by data centers, while natural gas and nuclear power are also expected to play important roles.
A data center can become operational in roughly two to three years, while energy infrastructure often requires much longer planning and construction timelines. If demand for computing power grows faster than utilities and grid operators can add capacity, some areas could face higher energy costs, transmission constraints, or delays in connecting new facilities.
Reminder for investors: The AI economy has physical limitations. Technology can move quickly. Infrastructure often cannot.
The Broader Economic Impact
Companies have been experimenting with AI to automate repetitive tasks, analyze information, improve customer service, write software, conduct research, and make decisions more efficiently. If those investments work as intended, businesses could produce more without proportionally increasing their costs. That could mean higher productivity, lower prices, stronger profit margins, and potentially faster economic growth.
This is one of the reasons economists have become so interested in AI. The International Monetary Fund (IMF) estimates that AI could affect almost 40% of jobs worldwide, with exposure reaching roughly 60% in advanced economies. Importantly, the IMF distinguishes between jobs where AI could complement workers and those where it could reduce demand for human labor.
The potential economic benefit is substantial, but it may not be evenly distributed.
Job Creator or Employee Replacement?
It would be unrealistic to assume that AI will only create jobs. Like with all changes in technology we are likely to see some jobs will disappear or require fewer workers, human tasks change, and entirely new jobs emerge.
The World Economic Forum's Future of Jobs Report 2025 estimates that technological and other major economic trends could create 170 million jobs and displace 92 million by 2030, resulting in a net increase of 78 million jobs.
The report considers several forces affecting employment, but technological change is identified as the biggest driver of both job creation and displacement. The report also found that 77% of employers expect to "upskill" their existing workers in response to technological change. Ideally, AI will allow workers to become more productive, not replacing them entirely. But there will also be jobs where AI can perform enough of the work that fewer people are needed. The transition could be difficult for some workers even if the overall economy becomes more productive.
Opportunity and Risk for Investors
From an investment perspective, the interesting part is how widely these effects could spread.
The beneficiaries of AI may include more than the companies developing AI models. Utilities, semiconductor manufacturers, data center operators, construction companies, energy producers, industrial companies, and businesses that successfully use AI to improve their operations could all benefit.
But the opposite is also possible. Companies that are slow to adapt could lose customers or become less efficient than their competitors. Industries with significant exposure to routine or repetitive work could face greater disruption.
And just because a company benefits from AI does not mean its stock is automatically a good investment. As we discussed in Parts 2 and 3, the price investors pay still matters. That may be one of the biggest lessons of this entire series: a powerful economic trend can create real opportunities without making every investment associated with that trend attractive.
Key Takeaways
The impact from artificial intelligence is much more than what the technology can accomplish. It is increasing demand for electricity and infrastructure while encouraging businesses to rethink how they operate. It could improve productivity, create new industries, and contribute to economic growth. At the same time, it could disrupt existing businesses and eliminate or significantly change some jobs.
Like many other disruptive technologies there are fears about energy use, the environment, jobs and the economy as a whole. In time, we may find that those fears are overblown or that they are absolutely accurate. The important question isn't simply whether AI will succeed. It is how the benefits and costs of that success will be distributed across companies, industries, workers, and the broader economy.
Part 5 Preview
AI may ultimately prove to be one of the most important technological developments of our generation. But knowing that doesn't tell an investor which companies will succeed, how quickly the benefits will arrive, or what today's prices already assume.
In the final part of this series, we'll bring everything together and look at what AI means for long-term investors.