Rising Electricity Demand, Supply Constraints Put AI Boom at Risk, Raise Worries Over Residential Rates

Brian Earnest , Tanner Ehmke , Jacqui Fatka , Rob Fox , Corey Geiger , Jeff Johnston , Emmie Noyes , Christina Pope , Abbi Prins , Billy Roberts , Lauren Sturgeon Bailey and Teri Viswanath

October 10, 2024

Billions have been invested in generative AI with the expectation that big productivity gains will propel the U.S. economy in the years to come. But here’s the rub: Many market participants believe we may be only 12-24 months away from not having enough electricity to run these power-hungry Gen AI data centers.

U.S. farmers are harvesting a record-large soybean crop and the third-largest corn crop on top of large carryover stocks from the previous marketing year. The ample harvests have coincided with a plethora of export headwinds including a strong U.S. dollar, political uncertainty over trade policy, stalled rail shipments into Mexico, and low water levels on the Mississippi River – the main artery for U.S. grain and oilseed exports. All the livestock sectors, including dairy, are benefitting from the lower feed cost environment and enjoying their best profitability in recent years. Given the poor current and forecast prices for row crops, momentum is building in Congress to get a new farm bill done before year-end.

The combination of weakening labor market metrics, a big downward revision in the past year’s job creation numbers and a series of tame inflation reports cleared the way for the Fed’s 50bps rate cut in September. But borrowing costs won’t fall in tandem due to higher long-term interest rate expectations and tightening lending standards.

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