MW Big Tech is spending on power for AI - whether Washington functions or not
By Charlie Garcia
Charlie Garcia responds to readers about AI doubters, nuclear reactors - and why Blackstone fixes what City Hall won't
China is building power infrastructure because they're smart enough to know that electricity is what separates civilization from camping.
Dear Charlie,
I read with interest your discussion of the grid as the bottleneck for AI development in the United States. But aren't you assuming that AI will not be the bust that many people now think it may be? What if AI turns out to be an overhyped loser? Then won't China have won a race that was never run?
Steve
Dear Steve,
Appreciate you reading the piece. And fair question. You're asking if I'm betting the farm on AI turning out to be the next internet instead of the next Pets.com.
Short answer: I don't care if AI is overhyped. Here's why: electricity infrastructure isn't an AI bet. It's a civilization bet.
Whether AI cures cancer or just gets really good at writing bad poetry, we still need to power data centers, charge electric vehicles, run manufacturing plants, and keep the lights on while everyone streams Netflix. The grid is failing now. Texas nearly froze to death because their power grid has the reliability of a 1987 Yugo. California had to schedule blackouts like they're yoga classes.
AI might be the excuse we're using to finally fix infrastructure we should've upgraded 30 years ago. If that makes me a sucker, fine. At least I'm a sucker who can turn on the air conditioning in August.
As for China "winning a race that was never run," that's the wrong metaphor. China is building power infrastructure because they're smart enough to know that electricity is what separates civilization from camping. If AI turns out to be garbage, they'll still have functional power plants and we'll still be arguing about whether windmills cause cancer.
The Romans built aqueducts because they thought the gods demanded clean water. Turns out the gods didn't exist, but the aqueducts still worked. Sometimes the right infrastructure for the wrong reasons beats no infrastructure at all.
Besides, even if AI is 90% hype, that remaining 10% still needs a ton of electricity.
Betting on voltage over vaporware,
Charlie
P.S. - If you're right and AI is a complete bust, at least I'll be able to say I invested in companies that make actual things instead of tokens that represent someone's dream of making money by selling tokens to other people.
Dear Charlie,
Here's two interesting points that one may consider: First, one should look at how much coal China is actually using versus how many mines/plants it may have. Second, the U.S. has many more nuclear reactors than does China.
W.L.
Dear W.L.,
You're right on both counts. China's 3,100 coal plants run at 50% utilization, so they're only burning coal at seven times our rate. And we have 94 nuclear reactors versus their 58.
Here's what those numbers actually mean:
Our 94 reactors are an average of 42 years old. The oldest went online in 1969 - the year the U.S. landed on the moon. It's still running. America built its first new reactors in 30 years at Vogtle, in Georgia. Two of them. Took a more than decade; cost more than double.
China's reactors are mostly under 20 years old. They're building Generation III, Generation IV - China opened the world's first commercial Gen IV reactor in 2023. They have 28 under construction and last April approved 10 more.
The U.S.? America approved reopening Three Mile Island - the one that melted down in 1979.
The U.S. has more nuclear reactors than China. It's like having the world's largest collection of rotary phones while the other guy's building cell towers.
So yes, the U.S. has more nuclear reactors than China. It's like having the world's largest collection of rotary phones while the other guy's building cell towers.
On coal - China built so much infrastructure they can run it at half-speed and still burn seven times more than America does. That's not inefficiency. That's having options. The U.S. is running its 240 plants into the ground because that's all there is.
You're right. America is ahead on 50-year-old technology. China is ahead on everything built in this century.
May the best infrastructure win.
Charlie
P.S. - Nothing says "global superpower" quite like bragging that your energy infrastructure predates the invention of the VCR. The U.S. is not falling behind China; it's been behind since China figured out that concrete doesn't need congressional approval.
Dear Charlie,
Radicalization within the political arena is not really good for infrastructures. The energy shortage and infrastructures' extreme decay were both obvious for some time. And now the U.S. government is shut down.
Reality will hit the earth soon. Most will call this a crash.
Pierre
Dear Pierre,
Political radicalization is terrible for infrastructure. So is government dysfunction, regulatory paralysis, and the fact that Congress couldn't organize a two-car parade.
The energy shortage and grid decay in the U.S. have been obvious for 15 years. Nobody fixed it because cutting ribbons on transformer stations doesn't win elections.
Here's what happens next: Reality doesn't care about your political dysfunction. Data centers still need power. AI doesn't run on bipartisan cooperation.
Which means someone builds the infrastructure anyway.
That someone is private capital. Blackstone (BX) deployed $25 billion in 90 days. Microsoft $(MSFT)$ is building power plants. Utilities being upgraded before the grid collapses during an earnings call.
You're right - most people will call this a crash when reality hits. I'm calling it the biggest infrastructure spending cycle in American history, happening whether Washington functions or not. The 10 companies that deliver transformers, cables, and grid systems get paid regardless of which party controls Congress.
Chaos is expensive. Someone profits from fixing it.
Yours in profitable dysfunction,
Charlie
P.S. - The beautiful thing about infrastructure investment is that it doesn't require optimism about government - only pessimism about its alternatives. When the choice is between Congress fixing the grid and Blackstone doing it for 12% returns, bet on greed every time. At least greed shows up for work.
Dear Charlie,
I'm a mother of three and a CPA. I manage our family's investments conservatively - index funds, some bonds; nothing crazy.
You're telling me to bet on American infrastructure when I can't even get the pothole on my street fixed after two years of complaints? When the school needs a new HVAC system but the city says there's no budget?
I get your thesis about China building while America argues. But you're asking me to invest in the same incompetence that can't maintain what we already have. Why would companies suddenly build transmission lines when municipalities can't even patch roads?
My husband says I'm too pessimistic. But I'm the one who balances our checkbook.
Jennifer
Dear Jennifer,
You balance the family checkbook. That makes you more qualified than 90% of Congress.
You're asking why companies would suddenly build transmission lines when your city can't fix a pothole. Great question. Here's the answer: because Microsoft needs power and your city council doesn't.
The pothole stays because fixing it requires a municipal bond issue, three committee hearings and a contractor whose brother-in-law knows a guy. Nobody profits enough to care.
The transmission line gets built because Blackstone deployed $25 billion and they'd like $28 billion back. When private capital wants something, it generally gets it. When public works want something, they schedule another hearing.
You're not betting on American competence. You're betting on American desperation. Your skepticism is healthy. Index funds are smart. But sometimes the boring infrastructure stocks ARE the index, just concentrated enough to actually benefit when the thing finally happens.
May your portfolio outperform your municipality,
Charlie
P.S. - Your city can't fix the pothole because there's no profit in asphalt and nobody gets fired for ignoring it. Blackstone will build the transmission line because there's 30% IRR in electrons and someone absolutely gets fired if they don't.
Dear Charlie:
The squirrel fires remark had me rolling on the floor. Made my day!!
Violet
Dear Violet,
Glad the squirrel barbecue gave you a laugh. Though honestly, with the way our grid's running, we might want to start collecting recipes now while we still have internet access to look them up.
Thanks for reading.
Charlie
P.S. - If you're near a squirrel when reading this, maintain eye contact. Show no fear. They can smell weakness.
Charlie Garcia is founder and a managing partner of R360, a peer-to-peer organization for individuals and families with a net worth of $100 million or more.
Agree? Disagree? Share your comments with Charlie Garcia at charlie@R360Global.com. Your letter may be published anonymously in the weekly "Dear Charlie" reader mailbag. By emailing your comments to Charlie Garcia, you agree to have them published on MarketWatch anonymously or with your first name if you give permission.
You understand and agree that Dow Jones & Co., the publisher of MarketWatch, may use your story, or versions of it, in all media and platforms, including via third parties.
More from Charlie Garcia:
These stocks are the real deal for investors in AI - Wall Street is just chasing bubbles
Winning stock investors make money spotting trends early - and this one is just starting
Younger Americans are ditching apps for activities - and these stocks are moving
A dividend-paying 'vending machine' - this oil stock weathers tariffs and OPEC
MW Big Tech is spending on power for AI - whether Washington functions or not
By Charlie Garcia
Charlie Garcia responds to readers about AI doubters, nuclear reactors - and why Blackstone fixes what City Hall won't
China is building power infrastructure because they're smart enough to know that electricity is what separates civilization from camping.
Dear Charlie,
I read with interest your discussion of the grid as the bottleneck for AI development in the United States. But aren't you assuming that AI will not be the bust that many people now think it may be? What if AI turns out to be an overhyped loser? Then won't China have won a race that was never run?
Steve
Dear Steve,
Appreciate you reading the piece. And fair question. You're asking if I'm betting the farm on AI turning out to be the next internet instead of the next Pets.com.
Short answer: I don't care if AI is overhyped. Here's why: electricity infrastructure isn't an AI bet. It's a civilization bet.
Whether AI cures cancer or just gets really good at writing bad poetry, we still need to power data centers, charge electric vehicles, run manufacturing plants, and keep the lights on while everyone streams Netflix. The grid is failing now. Texas nearly froze to death because their power grid has the reliability of a 1987 Yugo. California had to schedule blackouts like they're yoga classes.
AI might be the excuse we're using to finally fix infrastructure we should've upgraded 30 years ago. If that makes me a sucker, fine. At least I'm a sucker who can turn on the air conditioning in August.
As for China "winning a race that was never run," that's the wrong metaphor. China is building power infrastructure because they're smart enough to know that electricity is what separates civilization from camping. If AI turns out to be garbage, they'll still have functional power plants and we'll still be arguing about whether windmills cause cancer.
The Romans built aqueducts because they thought the gods demanded clean water. Turns out the gods didn't exist, but the aqueducts still worked. Sometimes the right infrastructure for the wrong reasons beats no infrastructure at all.
Besides, even if AI is 90% hype, that remaining 10% still needs a ton of electricity.
Betting on voltage over vaporware,
Charlie
P.S. - If you're right and AI is a complete bust, at least I'll be able to say I invested in companies that make actual things instead of tokens that represent someone's dream of making money by selling tokens to other people.
Dear Charlie,
Here's two interesting points that one may consider: First, one should look at how much coal China is actually using versus how many mines/plants it may have. Second, the U.S. has many more nuclear reactors than does China.
W.L.
Dear W.L.,
You're right on both counts. China's 3,100 coal plants run at 50% utilization, so they're only burning coal at seven times our rate. And we have 94 nuclear reactors versus their 58.
Here's what those numbers actually mean:
Our 94 reactors are an average of 42 years old. The oldest went online in 1969 - the year the U.S. landed on the moon. It's still running. America built its first new reactors in 30 years at Vogtle, in Georgia. Two of them. Took a more than decade; cost more than double.
China's reactors are mostly under 20 years old. They're building Generation III, Generation IV - China opened the world's first commercial Gen IV reactor in 2023. They have 28 under construction and last April approved 10 more.
The U.S.? America approved reopening Three Mile Island - the one that melted down in 1979.
The U.S. has more nuclear reactors than China. It's like having the world's largest collection of rotary phones while the other guy's building cell towers.
So yes, the U.S. has more nuclear reactors than China. It's like having the world's largest collection of rotary phones while the other guy's building cell towers.
On coal - China built so much infrastructure they can run it at half-speed and still burn seven times more than America does. That's not inefficiency. That's having options. The U.S. is running its 240 plants into the ground because that's all there is.
You're right. America is ahead on 50-year-old technology. China is ahead on everything built in this century.
May the best infrastructure win.
Charlie
P.S. - Nothing says "global superpower" quite like bragging that your energy infrastructure predates the invention of the VCR. The U.S. is not falling behind China; it's been behind since China figured out that concrete doesn't need congressional approval.
Dear Charlie,
Radicalization within the political arena is not really good for infrastructures. The energy shortage and infrastructures' extreme decay were both obvious for some time. And now the U.S. government is shut down.
Reality will hit the earth soon. Most will call this a crash.
Pierre
Dear Pierre,
Political radicalization is terrible for infrastructure. So is government dysfunction, regulatory paralysis, and the fact that Congress couldn't organize a two-car parade.
The energy shortage and grid decay in the U.S. have been obvious for 15 years. Nobody fixed it because cutting ribbons on transformer stations doesn't win elections.
Here's what happens next: Reality doesn't care about your political dysfunction. Data centers still need power. AI doesn't run on bipartisan cooperation.
Which means someone builds the infrastructure anyway.
That someone is private capital. Blackstone (BX) deployed $25 billion in 90 days. Microsoft (MSFT) is building power plants. Utilities being upgraded before the grid collapses during an earnings call.
You're right - most people will call this a crash when reality hits. I'm calling it the biggest infrastructure spending cycle in American history, happening whether Washington functions or not. The 10 companies that deliver transformers, cables, and grid systems get paid regardless of which party controls Congress.
Chaos is expensive. Someone profits from fixing it.
Yours in profitable dysfunction,
Charlie
P.S. - The beautiful thing about infrastructure investment is that it doesn't require optimism about government - only pessimism about its alternatives. When the choice is between Congress fixing the grid and Blackstone doing it for 12% returns, bet on greed every time. At least greed shows up for work.
Dear Charlie,
I'm a mother of three and a CPA. I manage our family's investments conservatively - index funds, some bonds; nothing crazy.
You're telling me to bet on American infrastructure when I can't even get the pothole on my street fixed after two years of complaints? When the school needs a new HVAC system but the city says there's no budget?
I get your thesis about China building while America argues. But you're asking me to invest in the same incompetence that can't maintain what we already have. Why would companies suddenly build transmission lines when municipalities can't even patch roads?
My husband says I'm too pessimistic. But I'm the one who balances our checkbook.
Jennifer
Dear Jennifer,
You balance the family checkbook. That makes you more qualified than 90% of Congress.
You're asking why companies would suddenly build transmission lines when your city can't fix a pothole. Great question. Here's the answer: because Microsoft needs power and your city council doesn't.
The pothole stays because fixing it requires a municipal bond issue, three committee hearings and a contractor whose brother-in-law knows a guy. Nobody profits enough to care.
The transmission line gets built because Blackstone deployed $25 billion and they'd like $28 billion back. When private capital wants something, it generally gets it. When public works want something, they schedule another hearing.
You're not betting on American competence. You're betting on American desperation. Your skepticism is healthy. Index funds are smart. But sometimes the boring infrastructure stocks ARE the index, just concentrated enough to actually benefit when the thing finally happens.
May your portfolio outperform your municipality,
Charlie
P.S. - Your city can't fix the pothole because there's no profit in asphalt and nobody gets fired for ignoring it. Blackstone will build the transmission line because there's 30% IRR in electrons and someone absolutely gets fired if they don't.
Dear Charlie:
The squirrel fires remark had me rolling on the floor. Made my day!!
Violet
Dear Violet,
Glad the squirrel barbecue gave you a laugh. Though honestly, with the way our grid's running, we might want to start collecting recipes now while we still have internet access to look them up.
Thanks for reading.
Charlie
P.S. - If you're near a squirrel when reading this, maintain eye contact. Show no fear. They can smell weakness.
Charlie Garcia is founder and a managing partner of R360, a peer-to-peer organization for individuals and families with a net worth of $100 million or more.
Agree? Disagree? Share your comments with Charlie Garcia at charlie@R360Global.com. Your letter may be published anonymously in the weekly "Dear Charlie" reader mailbag. By emailing your comments to Charlie Garcia, you agree to have them published on MarketWatch anonymously or with your first name if you give permission.
You understand and agree that Dow Jones & Co., the publisher of MarketWatch, may use your story, or versions of it, in all media and platforms, including via third parties.
More from Charlie Garcia:
These stocks are the real deal for investors in AI - Wall Street is just chasing bubbles
Winning stock investors make money spotting trends early - and this one is just starting
Younger Americans are ditching apps for activities - and these stocks are moving
A dividend-paying 'vending machine' - this oil stock weathers tariffs and OPEC
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