The Building Blocks Behind AI’s Next Wave

A historic inflection point

Railroads unlocked new markets and gave rise to industries like mail-order retail in the 1800s. Electrification boosted productivity by enabling innovations like the moving assembly line in the early 1900s. Then, as the 1900s gave way to the new century, the digital economy was built upon nascent internet infrastructure, which connected global markets and gave rise to e-commerce.

Today, acceleration in artificial intelligence (AI) and its demands on data and computational power could have far-reaching implications for digital infrastructure, and is already driving significant capital expenditure, according to Goldman Sachs Investment Banking in its report, “Powering the AI Era.” Big tech companies are expected to invest $1 trillion in AI by 2027¹. Data center demand is outpacing supply, and AI server racks will require 50 times more power than cloud computing data centers five years ago².

Infrastructure in focus

Goldman Sachs Global Investment Research estimates that energy-hungry AI facilities will increase data center power demand +160% by 2030³, and that $5 trillion in funding will be needed for digital infrastructure and power. Data center demand is outpacing supply, with vacancy rates at a record low of 3% and near 0% in the most popular markets⁴. Goldman Sachs Research also estimates about 60% of data center demand growth by 2027 will need to be met with new power capacity³.

Additional energy demand from new AI data centers will need to be met by building new power infrastructure or improving existing systems. Utility-sector capital expenditures have more than doubled over the last decade, according to Goldman Sachs Investment Banking⁵, but the aging US power grid is not yet ready for AI-driven growth. The prospect of improving the grid for AI could represent an investment opportunity, but also raises potential risks, including navigating regulatory and permitting processes, supply-chain and transmission issues, and possible energy-efficiency breakthroughs in GPU chips.

“The future of AI will not be forged in code and large language models alone. It will be built with concrete, steel and silicon.” -Dan Dees, co-head of Global Banking and Markets, Goldman Sachs

Necessity is the mother of invention, and limitations are inspiring research and development into technologies that could make better use of existing infrastructure for AI, including in:

Carbon capture
Small-scale power generation close to users
Longer-duration storage solutions
Demand flexibility, or the ability of electricity consumers to change consumption patterns

One emerging option is small modular nuclear reactors (SMRs), which are designed for factory construction and modular assembly for easy transportation and on-site installation. In some cases, partnerships are forming between big tech and utility players to co-develop assets that ensure power for AI data centers, even reviving dormant nuclear power plants. But nuclear power still requires heavy investment and capital expenditure that is unlikely to pay off for years⁶.

Innovative financing is rising

Strategic partnerships and creative combinations of public and private capital are catalyzing artificial intelligence opportunities, with many types of investors looking to gain greater exposure to this investment theme, particularly through alternatives. Joint ventures and collaborations among public pension funds, financial sponsors, sovereign wealth funds, and data center operators for AI are also gaining momentum.

AI likely to remain a prominent investment theme

AI has been a dominant investment theme of the 2020s. As AI adoption and use cases continue to grow, the need for more energy and data centers to support that growth is likely to remain a key focus of investors across both public and private markets.

If you would like to explore the AI investment theme further in your portfolio, please speak to your Goldman Sachs advisor.
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For more on AI:

Listen to our podcast episode AI Exchanges: Where Will the Power Come From?
Read our Investment Banking report, “Powering the AI Era."

Footnotes

New Street Research, August 9, 2025
Goldman Sachs, “1000 homes of power in a filing cabinet — rising power density disrupts AI infrastructure,” May 7, 2025
https://www.goldmansachs.com/insights/articles/rising-power-density-disrupts-ai-infrastructure
Goldman Sachs Research, “AI is poised to drive 160% increase in data center power demand,” May 14, 2024 https://www.goldmansachs.com/insights/articles/AI-poised-to-drive-160-increase-in-power-demand
Public press releases, UBS, datacenterHawk, WallStreet Research, CBRE Investment Management
Goldman Sachs, “Powering the AI Era,” 2025, https://www.goldmansachs.com/what-we-do/investment-banking/insights/articles/powering-the-ai-era
Goldman Sachs Research, Is nuclear power set for a revival?https://www.goldmansachs.com/insights/articles/is-nuclear-power-set-for-a-revival?chl=em&plt=briefings&cid=0613&src=int&plc=body

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