AI: The Energy Saga

AI: The Energy Saga

Generative AI relies on supercomputers to perform complex calculations and answer increasingly intricate questions. It is thus highly dependent on advanced semiconductors (chips), large data sets and powerful algorithms (models). The energy requirements of these processors, which are typically housed in datacentres, are enormous and require stable and secure power sources.

According to the International Energy Agency (IEA), energy for data centres, cryptocurrency, and artificial intelligence accounted for roughly 2% of global energy demand in 2022. The IEA forecasts that the energy demand could almost double from 460 TWh in 2022 to about 800 TWh by 2026. However, these estimates may vary significantly depending on the actual demand for generative AI products and services over the next two years.

Cloud computing giants like Amazon, Microsoft, and Alphabet are heavily investing in their data centres to enhance their capabilities for running complex AI applications. This involves training and inferencing (producing outputs) with AI models. Consequently, their energy consumption and greenhouse gas emissions have risen. According to Alphabet’s 2024 Environmental Report, their greenhouse gas emissions have increased by 48% since 2019. The growing demand for AI, combined with Alphabet’s termination of some clean energy projects, has led to this overall increase in its emissions.

Why haven’t companies simply expanded their energy capacity? Data centres require a stable energy supply that can be adjusted instantly. Renewable energy is not always reliable due to its dependence on unpredictable elements. Nuclear power can provide the needed stability, but building nuclear plants takes more than five years. In contrast, gas-fired plants take about two years to build.

The cloud providers are exploring various ways to increase their access to stable energy sources. Earlier this year, Amazon bought a data centre from US power generator Talen Energy, located next to a nuclear power station. The data centre will be powered with energy from the station.

Microsoft on the other hand, signed a power purchase agreement with Brookfield Asset Management, to support the development of 10.5 gigawatts of renewable energy and to secure their energy requirements and offset their carbon footprint.

At the core of these new data centres are semiconductors responsible for all processing tasks. Nvidia claims that their flagship Blackwell Platform will enable organizations to “build and run real-time generative AI on trillion-parameter large language models at up to 25x less cost and energy consumption than its predecessor.” No wonder everyone is racing to get their hands on these chips.

Security Held In:
Security
Lunar Capital BCI Worldwide Flexible Fund
Lunar Capital Offshore Portfolio Clients
Security
Lunar Capital BCI Worldwide Flexible Fund
Lunar Capital Offshore Portfolio Clients
Security
Lunar Capital BCI Worldwide Flexible Fund
Lunar Capital Offshore Portfolio Clients
Security
Lunar Capital BCI Worldwide Flexible Fund
Lunar Capital Offshore Portfolio Clients
Security
Lunar Capital BCI Worldwide Flexible Fund
Lunar Capital Offshore Portfolio Clients
Key Indicators
Index / Fund / Rate
Start of Year
Last Week
This Week
% Change YTD
Index / Fund / Rate
Start of Year
188.33
Last Week
214.18
This Week
216.71
% Change YTD
15.07% Lunar Capital increasesymbol
Index / Fund / Rate
JSE ALSI
Start of Year
76 893
Last Week
80 244
This Week
80 797 Lunar Capital increasesymbol
% Change YTD
5.08% Lunar Capital increasesymbol
Index / Fund / Rate
NASDAQ Composite
Start of Year
15 011
Last Week
17 733
This Week
18 353 Lunar Capital increasesymbol
% Change YTD
22.26% Lunar Capital increasesymbol
Index / Fund / Rate
S&P 500
Start of Year
4 770
Last Week
5 460
This Week
5 567 Lunar Capital increasesymbol
% Change YTD
16.72% Lunar Capital increasesymbol
Index / Fund / Rate
Prime Lending Rate
Start of Year
11.75%
Last Week
11.75%
This Week
11.75%
% Change YTD
0.00%
Index / Fund / Rate
USD/ZAR
Start of Year
18.30
Last Week
18.17
This Week
18.18 Lunar Capital increasesymbol
% Change YTD
-0.66% Lunar Capital stocktake arrow down
Index / Fund / Rate
EUR/ZAR
Start of Year
20.17
Last Week
19.47
This Week
19.72 Lunar Capital increasesymbol
% Change YTD
-2.23% Lunar Capital stocktake arrow down
Index / Fund / Rate
Brent Crude ($'barrel)
Start of Year
76.97
Last Week
84.87
This Week
86.98 Lunar Capital increasesymbol
% Change YTD
13.01% Lunar Capital increasesymbol
Source: Iress

Click here to access your account to view statements, obtain tax certificates, add or make changes to your investments.

Our email address is: [email protected]

Disclosures
Lunar Capital (Pty) Ltd is a registered Financial Services Provider. FSP (46567)
Read our full Disclosure statement: https://lunarcapital.co.za/disclosures/
Our Privacy Notice: https://lunarcapital.co.za/privacy-policy/
The Lunar BCI Worldwide Flexible Fund Fact Sheet  can be read here.
This stocktake is prepared for the clients of Lunar Capital (Pty) Ltd. This stocktake does not constitute financial advice and is generated for information purposes only.

Share article

Latest Posts

JP Mor-Gains
JP Mor-Gains
How is JP Morgan navigating an increasingly complex environment.
AI: The Energy Saga
AI: The Energy Saga
How are businesses dealing with AI's increasing energy demand?
quarterly-review
Quarterly Investment & Performance Review – 30 June 2024
The Lunar BCI Worldwide Flexible Fund achieved a Top 10% ranking of all Funds available in South Africa since its inception 8 years ago. Source: Moneymate.

Lunar Capital
on Eastwave Radio

Every Wednesday, at 07h45, Sabir chats with Nazia from Eastwave Radio (92.2 fm, live stream on
www.eastwave.co.za) on investing and the markets.

eastwave-radio
Scroll to Top