Yardeni Research outlines a key challenge facing the growth of new AI data centers

Investing.com - A lack of electricity might be an "Achilles’ heel" of the artificial intelligence industry, according to analysts at Yardeni Research.

The rapid proliferation of AI has fueled a surge in demand for data centers designed to house the chips powering the nascent technology.

Earlier this week, semiconductor group Advanced Micro Devices told investors that its AI data center revenue could increase by around 80% per year over the next three to five years. AMD’s group-wide revenue, as a result, is tipped to grow by around 35% annual in the same period.

Nvidia-backed CoreWeave also said on Tuesday that demand for its AI services has been solid and "insatiable," although, as the Yardeni analysts including Jackie Doherty flagged in a note, the company trimmed its full-year sales outlook because a major developer failed to deliver data centers on time.

The comment echoed recent concerns around the pace of data center construction raised by Microsoft CEO Satya Nadella, the analysts said.

Nadella particularly warned that the "biggest issue" facing the software giant right now is "the ability to get the [data center] builds done fast enough, close to power," adding that, should they not come online soon, "you may actually have a bunch of chips sitting in inventory that I can’t plug in."

But slow construction may not be the only data center-related issue, the Yardeni analysts said.

Citing a report from Bain & Company, the analysts said delays of up to five years connecting these sites to the ever-growing electricity required to underpin cutting-edge AI chips are the "most significant obstacle for data center growth."

Due to the geographic concentration of many data centers in a handful of U.S. states, electric grids in those areas are being heavily leaned on as well, the analysts said. They added that fears are swirling around whether data center demands will also drive up electricity bills, making consumers less likely to support the construction of new facilities in their communities.

"Access to electricity is also causing headaches for those building data centers," the Yardeni analysts wrote.