America is ready to go big on AI infrastructure

• America is ready to scale up its AI infrastructure.
• The generative-AI boom has put data-center capacity and energy constraints into focus.
• A $30 billion fund from Microsoft and BlackRock, plus a government task force, aims to address this.

America is stepping up plans to maintain an edge in the generative-AI race.

A key part of that strategy is making significant investments in domestic infrastructure — from data centers to chip production — so that the country is less reliant on places such as Taiwan, where tensions with neighboring China loom large.

On Tuesday, Microsoft and BlackRock announced the creation of a $30 billion megafund. A Microsoft press release said it was designed to "enhance American competitiveness in AI." Its backers have committed to driving the "significant infrastructure investment" needed to make artificial intelligence more powerful, the release added.

Critically, the firms behind the fund said these infrastructure investments "will be chiefly in the United States," where the plan is to fuel AI innovation and economic growth.

It means the fund — which involves the Global Infrastructure Partners unit BlackRock acquired in January and the Abu Dhabi, United Arab Emirates, investment firm MGX — will "make investments in new and expanded data centers," the press release said. It will also fund the energy infrastructure needed to power them, it added.

The fund's backers said other investments would be directed to "US partner countries." With debt financing, the fund's overall size could reach $100 billion.

"The capital spending needed for AI infrastructure and the new energy to power it goes beyond what any single company or government can finance," Microsoft's president, Brad Smith, said.

If America is serious about leading in AI — something the next president will inevitably contend with as China ramps up its efforts — it has little choice but to future-proof the technology by building more critical infrastructure.

Data centers, chip-manufacturing plants, and energy supply are all vital for making AI tick. But each of these domains is subject to pitfalls — be it supply-chain vulnerabilities or demand bottlenecks.

The US got the ball rolling on supporting its self-sufficiency with semiconductors — the hardware developed by the likes of Nvidia to provide computing power for large language models — with the CHIPS Act, passed by Congress in 2022.

While Nvidia and other US tech firms have led the chip space by focusing on design, manufacturing has largely been outsourced to the Taiwanese firm TSMC. Given rising fears of a Chinese invasion of Taiwan, there are concerns about supply-chain security.

Not all is steady on the data-center and energy front, either.

A June report on global data-center trends published by the commercial-real-estate group CBRE said the "worldwide power shortage is significantly inhibiting the global data center market's growth." Lack of growth has been a key problem in the US, where the AI boom has led to data-center vacancy rates dropping everywhere from Chicago to Northern Virginia.

That means data centers are in short supply, or, as the CBRE said, "North American data center availability keeps tightening due to robust demand," leading parts of the country's tech industry to consider drastic measures. The Financial Times reported last month that some Big Tech firms and their suppliers had even considered turning decommissioned power stations into data centers.

This supply shortage hasn't gone unnoticed in Washington. Last week, the White House said it held a roundtable with top AI leaders from around the country to "discuss steps to ensure the United States continues to lead the world in AI" by focusing on the data-center and energy issues.

With the likes of Nvidia's Jensen Huang and OpenAI's Sam Altman at the table, alongside top government officials such as Commerce Secretary Gina Raimondo, the discussion on American leadership in AI was tied to "national security, economic, and environmental goals," the White House said.

The headline result was the launch of a task force on AI-data-center infrastructure, designed to underscore the vital importance of building out what's needed to maintain momentum in the generative-AI race.

This may all be better late than never for the US. While the jury is still out on the potential for the AI boom to generate returns in the long run, it's clear that AI will be a critical geopolitical issue for the US in the years ahead.

More infrastructure on home soil will help the US have greater control over its destiny.