Microsoft and BlackRock’s $30 Billion Fund Set to Tackle AI’s Energy Crisis

BlackRock and Microsoft Forge $30 Billion AI Investment Fund

BlackRock is set to launch a colossal $30 billion artificial intelligence (AI) investment fund, partnering with technology titan Microsoft to address the urgent need for infrastructure that supports AI development.

This ambitious initiative, known as the Global AI Infrastructure Investment Partnership, will also involve Global Infrastructure Partners (GIP), which BlackRock’s infrastructure investment unit recently acquired for $12.5 billion.

The deal is anticipated to close in October 2024.

A Massive Financial Undertaking

The newly formed fund is poised to be one of Wall Street’s largest investment vehicles, aiming to secure up to $30 billion in equity investments.

In addition, it plans to leverage these funds to support up to $70 billion in debt financing, thereby maximising its investment potential.

The partnership includes Microsoft, which will collaborate closely with BlackRock and MGX, an investment firm backed by Abu Dhabi’s Mubadala, to tackle the growing demand for energy and data infrastructure essential for AI technology.

Meeting the Demands of AI

AI development is placing unprecedented demands on computing power and energy infrastructure.

This need is reflected in the projected growth of electricity consumption by data centers, which the International Energy Agency estimates could exceed 1,000 terawatt-hours by 2026—more than double the amount used in 2022.

Brad Smith, Microsoft’s president, highlighted the critical nature of this effort, stating,

“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.”

Strategic Partnerships and Advisory Roles

Nvidia, the leading chipmaker, will play a crucial advisory role in the fund, focusing on factory design and integration to ensure the infrastructure meets the intense computational demands of AI.

Jensen Huang, Nvidia’s CEO, commented,

“Accelerated computing and generative AI are driving a growing need for AI infrastructure for the next industrial revolution.”

This collaboration aims to alleviate the potential capacity bottlenecks that AI products might face in the near future.

Energy Sector Focus and Broader Implications

Larry Fink, BlackRock’s CEO, emphasised the significant long-term investment opportunities presented by this initiative.

He stated,

“Mobilising private capital to build AI infrastructure like data centres and power will unlock a multi-trillion-dollar long-term investment opportunity.”

BlackRock has identified the energy sector as a key area for growth, driven by the necessity to support AI technologies that demand substantial power and digital infrastructure.

Historic Comparisons and Future Outlook

This effort is among the latest in a series of major infrastructure investment vehicles created by large asset managers to meet the soaring energy needs of AI and cloud computing.

Earlier this year, Microsoft committed $10 billion to renewable electricity projects with Brookfield Asset Management.

In 2017, Blackstone announced a $40 billion infrastructure fund supported by Saudi Arabia, and last year, Brookfield raised $28 billion for what was then considered the largest infrastructure fund ever.

Growing U.S. Energy Demands

In the United States, which hosts a significant portion of the world’s data centres, electricity demand is on the rise.

A recent report from Grid Strategies revealed that electricity demand growth projections have surged from 2.6% to 4.7% annually over the past year, largely driven by the energy-intensive nature of data centres.

Bayo Ogunlesi, GIP’s CEO, highlighted the urgent need for private capital in this sector, stating,

“There is a clear need to mobilise significant amounts of private capital to fund investments in essential infrastructure.”

The Global AI Infrastructure Investment Partnership represents a monumental step towards addressing the energy and infrastructure challenges posed by rapid advancements in AI technology, reflecting both the scale and urgency of the investment required.