In 2024, AI started to gain widespread adoption. Now, 2025 will be the year that energy takes it to its next phase.Last year, some of the best-performing stocks in the market were driven by artificial intelligence (AI).Companies like NVIDIA NVDA, Amazon AMZN, IBM, Broadcom AVGO and more were Wall Street darlings and (perhaps) rightfully so. As efforts to expand generative AI applications mature, their use cases in finance, defense, healthcare, logistics, retail, and beyond will continue to evolve.Yet, as we’ve detailed for Prinsights readers, AI can only go as far as the energy that drives it forward.Yes, computer chips and good data are vital to AI – but energy is the source that gives data centers, algorithms and supercomputers life. That’s why last year, four of the S&P 500’s ten best-performing stocks in 2024 were energy and utility stocks (including Constellation and Targa, which we alerted to Prinsights readers in August). 
CNBCIn the world of AI, we’ve seen the phases of growth expand from data collection, preparation and modeling to an evolutionary stage that involves optimization, data validation and pipeline development. Throughout all of these phases, massive amounts of computing have triggered massive amounts of energy consumption – and by nearly every projection, we’re closer to the start of generative AI deployment marathon than we are even finishing the first lap.
Why Energy and AI are Joined at the Hip
Energy is the cornerstone of our technological future. Understanding the energy trends ahead is vitally important to businesses, governments and investors.It’s equally imperative to pay attention to the energy-AI relationship paradigm.Already, estimates from the International Energy Agency show that global electricity demand from data centers, especially those fueled in part by AI, could double between 2022 and 2026. And according to scientific experts at MIT, data centers are projected to make up to 21% of overall global energy demand by 2030, when they believe the cost of delivering AI to customers could finally be factored in.Now, to put some of this into perspective, simply creating an image using AI requires as much battery energy as is currently in your phone, according to a study by researchers from Carnegie Melon.Or, for a more pointed example, when training a large language model like OpenAI’s GPT-3, the energy consumption is around 1,300 megawatt-hours (MWh) of electricity – which estimates show is the equivalent to nearly the yearly consumption of about 130 US homes.Research shows that by 2027, AI-related electricity consumption could match countries like the Netherlands, Argentina and Sweden. 
International Energy AgencyThis growth trend is now becoming a global story with nearly every region around the world set to experience exponential electricity demand.As these trends advance this year and over time, we expect three core energy developments to take centerstage. Detailed below are three key areas that will be impacted as businesses, consumers and governments invest and place greater demand on AI.
3 Ways AI Will Send the Energy Sector into Overdrive
I – AI Unlocks Energy MergersThis year has already started off with a massive merger between two of the largest electricity generators in the U.S. merging together. On January 10, Constellation Energy agreed to buy Calpine for $16.4 billion. The move saw Constellation, the largest producer of nuclear energy in the U.S., combine its forces with Calpine, one of the largest generators of electricity from natural gas and geothermal sources.Companies like Talen (TLN), NRG Energy (NRG) and Vistra (VST) have also experienced a boost in their shares as projections show energy demands increasing. These three key players in the U.S. market offer positive indicators of valuation, growth, and momentum – and all have an interest in growing AI energy demands for both the present and the future.We expect this merger pattern to continue as companies diversify their energy footprint and energy needs grow.
II – AI Generates Greater Demand for Energy Storage and Battery Tech
The energy solutions that deliver security, resilience, and reliability will be those that ultimately succeed – both in the race for AI supremacy and energy independence. Battery technology offers a solution to much of those challenges and the innovations being developed with battery storage continue to grow exponentially.The general cost associated with lithium-ion batteries are dropping at the same time as their overall performance is improving – offering a cocktail for success in the energy storage space. As the grid continues to modernize in an effort to meet the growing demands of AI, battery storage will play a crucial role. That’s because energy storage and innovative battery technologies allow for energy to be a part of both a wholesale electric market while promoting national security.Companies like Albemarle, LG Energy and even Solid Power are ones to monitor for trends in the overall market as they continue to center businesses around advancements in the energy storage and battery space.
III – AI Pushes Nuclear Energy Forward
Microsoft, Google, Amazon and Meta have all started investing, developing and working on nuclear energy efforts to support their high-energy demand data centers spurred on by AI. The IEA International Energy Agencys that nuclear generation will exceed its previous record output set in 2021.The once famous (or infamous) Three Mile Island is even set to come back online, with a restart scheduled to begin during the first half of this year – thanks to a partnership inked by Microsoft. As one snarky Bloomberg headline put it, “Microsoft AI Needs So Much Power It’s Tapping Site of US Nuclear Meltdown.”As the year progresses, expect the conversation to center around small modular reactor (SMR) technology to grow. What are SMRs? Think of them as much smaller nuclear reactor facilities that can be manufactured offsite from where energy is needed and assembled on-site when ready.
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While SMRs have been in the innovation pipeline for a number of years, there has been little implementation because of the costs and regulatory complexities. That has seemingly changed as tech companies with very deep pockets have pushed for them. Last year, both Alphabet and Amazon signed respective deals with companies like X-energy, Kairos and Energy Northwest that have SMR ambitions.Companies like Oklo (OKLO) and NuScale (SMR) have made small but noteworthy progress in their SMR efforts. And while the promise of demand from AI is real and the proposition that SMRs offer shines, the transition can take time and patience to navigate.The AI-Energy symbiosis that the world’s largest companies, governments and ambitious CEOs are pushing forward will continue to grow.More By This Author:Interview: Ana Kasparian On Economic Policy, The Working Class And More How A Teen’s Questions Can Optimize Your Long-Term Investment MindsetFive Commodity Trends To Follow In 2025
