AI for AI: Optimizing Additional Infrastructure Build-out to Power Artificial Intelligence Data Centers

• URL: http://arxiv.org/abs/2609.08166v1
• Date: Tue, 08 Sep 2026 02:55:04 GMT
• Title: AI for AI: Optimizing Additional Infrastructure Build-out to Power Artificial Intelligence Data Centers
• Abstract summary: Rapid growth in electricity demand from data centers is leading to higher electricity prices.<n>We develop a framework linking data-center load growth, available generation capacity, and market-clearing prices to understand this phenomenon.<n>The analysis highlights a central challenge of the data-center build-out: even when rapid demand growth increases the need for new generation, uncertainties related to load forecasts, development execution risks, and value cannibalization from overbuilding capacity may weaken incentives to invest at the pace required to keep electricity prices stable.
• Score: 42.13843953705695
• License: http://arxiv.org/licenses/nonexclusive-distrib/1.0/
• Abstract: The twenty-first century's transformative technology, artificial intelligence, is increasingly constrained by the twentieth century's transformative technology, the electricity grid. Rapid growth in electricity demand from data centers is leading to higher electricity prices, without a compensating supply-side response. We develop a framework linking data-center load growth, available generation capacity, and market-clearing prices to understand this phenomenon. We first analyze a deterministic model to show how differing estimates of demand and supply growth rates affect prices. We then model the expansion of new data centers and their associated electricity demand, together with build-outs of new electricity supply, as stochastic processes,resulting in probabilistic distributions of supply, demand, and prices rather than a single forecast. Finally, we formulate generation expansion as a stochastic control problem in which a revenue-maximizing investor dynamically chooses the intensity of supply-side investments. The analysis highlights a central challenge of the data-center build-out: even when rapid demand growth increases the need for new generation, the uncertainties related to load forecasts, development execution risks, and value cannibalization from overbuilding capacity may weaken incentives to invest at the pace required to keep electricity prices stable.

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