Microsoft And BlackRock Collaborate on $30 Billion AI Infrastructure Fund
Energy: The Next AI Trade
Over the past year, it has become increasingly clear that the future of AI trade lies in energy. Both BlackRock and Microsoft have recognized this and are taking steps to capitalize on it. The two industry leaders are reportedly planning to launch a $30 billion AI investment fund. This fund will enable Microsoft to construct data centers and energy projects to meet the growing demands of AI, as reported by the Financial Times.
BlackRock and Microsoft's AI Investment Fund
Global Infrastructure Partners, a new infrastructure investment unit of BlackRock, is initiating a significant investment fund in collaboration with Microsoft and Abu Dhabi’s MGX. Nvidia will offer guidance on factory design and integration. The partnership aims to address the immense power and infrastructure requirements of AI development, which are projected to overburden existing energy systems. AI's computational demands far surpass those of previous technologies.
Financial Details of the Partnership
The partnership is aiming to raise up to $30 billion in equity and plans to leverage an additional $70 billion in debt. Larry Fink, in a statement, said, "Mobilizing private capital to build AI infrastructure like data centers and power will unlock a multitrillion-dollar long-term investment opportunity." Brad Smith, Microsoft’s president, added, "The country and the world are going to need more capital investment to accelerate the development of the AI infrastructure needed. This kind of effort is an important step."
AI Infrastructure for the Next Industrial Revolution
Jensen Huang of Nvidia stated, "Accelerated computing and generative AI are driving a growing need for AI infrastructure for the next industrial revolution." This upcoming fund is the latest effort by a major asset manager to address the increasing energy needs of generative AI and cloud computing. Earlier this year, Microsoft pledged $10 billion to renewable energy projects with Brookfield Asset Management and set a goal to achieve 100% zero-carbon energy by 2030.
Increasing Energy Demand
The International Energy Agency forecasts that global electricity consumption by data centers could surpass 1,000 terawatt-hours by 2026, more than double the 2022 level. In the U.S., which is home to a third of the world's data centers, electricity demand is increasing for the first time in 20 years. A report from Grid Strategies shows that five-year electricity demand projections in the U.S. have nearly doubled, from 2.6% to 4.7%.
Powering Up America
In a note titled "The Next AI Trade" from April of this year, various investment opportunities for powering up America were outlined, most of which have significantly outperformed the market. A favorite name has been the Sam Altman-backed Oklo, which has been highlighted as the potential solution to the extreme forthcoming demands in energy as a result of artificial intelligence. Oklo makes nuclear power plants, ranging from 15 MWe to 50 MWe, utilizing liquid metal reactor technology, in soon-to-be everywhere small modular reactors.
Bottom Line
The collaboration between Microsoft and BlackRock on a $30 billion AI infrastructure fund underscores the growing recognition of energy as the next frontier in AI trade. As AI development continues to increase, so too will the demand for energy and infrastructure. This partnership represents a significant step towards meeting these demands and unlocking a multitrillion-dollar long-term investment opportunity. What are your thoughts on this development? Feel free to share this article with your friends. Don't forget to sign up for the Daily Briefing, which is delivered every day at 6pm.
