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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Imagine a consortium between a) a multitrillion dollar asset manager whose corporate governance values shift with the wind b) a juggernaut tech company that has faced censure from competition regulators and c) an authoritarian petrostate with a chequered human rights record.
Is this the latest villain to come out of the Marvel Cinematic Universe? No, this group is very real. The alliance is planning a $100bn spending spree that is to “enhance American competitiveness in AI while meeting the growing need for energy infrastructure to power economic growth”.
The trio is comprised of BlackRock, Microsoft and MGX, the latter an investment vehicle of Abu Dhabi. The group says it can collectively stump up $30bn of equity capital, which will be leveraged three times to hit total purchasing power, to build out the vast power infrastructure that artificial intelligence will supposedly require. It is one of several private capital attempts to get in on the gold rush.
The mining is proving to be very expensive, whether for semiconductors, computing power or energy. The result is an arms race between already ultra-dominant players in the economy, who could further entrench their power by controlling the next great technological innovation. Society and regulators should consider if that heralds a happy ending, or a dubious plot development.
The massive pools of capital that have accumulated around the world have increasingly looked to steadier, long-term investment horizons provided by infrastructure, private credit and a combination of the two. Even before the AI mania of the past two years, electrification, power transmission and distribution, as well as the clean energy transition, were prime targets for asset managers. BlackRock purchased Global Infrastructure Partners for $12.5bn precisely to get in on this mega trend.
Electricity demand had been largely flat in the US for several years after the financial crisis. But that is fast changing: the US Energy Department expects a sharp 2.4 per cent compound annual growth rate spike between now and 2030. In particular, the power needs in Texas and Virginia are acute given their heavy concentration of data centres.
What was an arms race between the likes of BlackRock, Blackstone, and Brookfield now seems to require latching on to a Big Tech behemoth and perhaps a sovereign wealth fund for good measure. Microsoft argues that AI infrastructure requires efforts that go beyond any single country or company. Maybe we need a superhero antitrust lawyer to scrutinise that proposition before it is too late.