AI’s moment: the grid for growth

As with any investment, your capital is at risk.

Thomas Edison opened the first commercial electricity grid in 1882 in New York City, when Pearl Street Station began serving direct current to a mighty one-square-mile area of lower Manhattan. Over a century on, we’re still electrifying.

One of the more interesting constraints in artificial intelligence may not be model architecture or chip supply; it could be electricity. The IEA (International Energy Agency) now projects that global data‑centre electricity use could roughly double to about 945 TWh by 2030, with AI a major driver.

Power demand is becoming a consequential enough bottleneck to shape capital allocation across both digital infrastructure and the wider energy system. That’s a feature that should interest all long-term, growth-focused investors.

From algorithms to amps

Hyperscale campuses that once drew tens of megawatts plan increasingly for 100 MW and beyond, with some designs contemplating several hundred megawatts on a single site. What was once a server room now behaves more like a factory plugged into the grid. AI clusters within those factories can generate high-intensity cycles of electricity demand, and those cycles become more pronounced as the scale of data centres and the processing power of GPUs rise.

Why the demand profile is different

What unsettles utilities is not only how much electricity data centres draw, but how they draw it. In the largest markets, operators describe these sites as running close to full power most hours of the day and most months of the year.

Dominion Energy, for example, cites an industry load factor near 90 per cent – a very different demand curve compared to the traditional daytime spike. That elongated demand is then overlaid with higher-density workloads inside the building.

Together, the pattern explains why three things increasingly need to work in step:

• resilience (equipment that rides through bumps on the grid)
• storage (batteries that bridge short mismatches and provide fast backup)
• and new supply (in many cases more local supply, so campuses can keep expanding without overwhelming local distribution lines)

When designed together, sites can be permitted and built faster, energy costs can fall, and more locations can host high-value AI work.

Who builds the cables, boxes and poles?

We seek companies with both exposure to and advantages within this electrification phenomenon.

The power management company Eaton’s edge is breadth plus integration. Its switchgear, backup systems and power‑quality equipment are engineered to work together and be installed at scale, shortening design and retrofit cycles for denser rooms.

The electrical cable layer Nexans offers a different kind of moat: it is among a small group able to deliver 525 kV high‑voltage direct‑current subsea cables, and it has recently expanded its Norwegian plant to meet the demand for long-distance links that move renewable power to where it is needed. Those are capabilities, certifications and capacity that take years to replicate.

Stella‑Jones is a reminder that the unglamorous last mile matters too. It is a leading North American supplier of wood utility poles, shipping over one million poles annually, supported by a broad network of treatment facilities.

The company’s advantage is not simply that more poles will be needed; it is that the supply side is concentrated and Stella‑Jones’ scale makes it the key provider to utility companies. Over a long horizon, that positions it to capture steady volume growth as the grid expands.

Why storage matters

If AI demands electricity on tap, then batteries in the system can ensure the right level of flow. Global battery storage built in the power sector more than doubled in 2023, and some industry trackers estimate the broader storage market’s growth at close to threefold.

Scale is bringing costs down and project durations up, broadening use‑cases beyond brief bursts to multi-hour support.

Where will the next megawatt come from, and who will be paid to deliver it?

The battery major CATL’s advantage is not size alone; it is what size enables. A large and continuing R&D programme with more than 20,000 researchers supports a wide range of chemistries and systems for both grid and on‑site applications.

That capability can sustain share as utilities and data‑centre operators ask batteries to do more jobs, from smoothing output to keeping critical loads running through short disturbances.

At the edge of the grid, Enphase’s solar electricity business, with its microinverter architecture and software, turns many small solar-plus-battery systems into visible, controllable assets. As more feeders host dense commercial loads, visibility and coordination become more valuable, especially where virtual power‑plant programmes let thousands of homes help stabilise local power at critical times. 

Hyperscalers as energy partners, not just customers

It is clear that large cloud providers are not waiting for the grid to solve everything for them.

Amazon has been the world’s largest corporate buyer of renewable energy for five consecutive years, while Microsoft’s framework with Brookfield aims to develop over 10.5 GW of new wind and solar between 2026 and 2030 in the US and Europe.

These are not just purchases; they give developers the confidence to build, while helping lower delivered energy costs and de-risk future campus expansions. For investors, the point is that balance sheets and operating know-how can turn a constraint into an advantage. 

Efficiency still matters

Demand growth and efficiency can move together. NVIDIA is delivering more useful work per unit of electricity with every iteration of its system by improving how chips, networks and software fit together so that models train and run faster on the same power budget. That will not flatten overall demand on its own, but it can stretch each megawatt further and, over time, redirect spending toward systems that get more done with less.

A long‑term frame

AI’s appetite for electricity looks less like a short‑term blip and more like a catalyst for modernising one of the least digitised systems in the economy.

We aim to own the advantaged enablers of this huge levelling up. Where will the next megawatt come from, and who will be paid to deliver it?

There’s gathering evidence that the essential physical work of electrification will provide plenty of opportunities. Our time horizon and broad approach to growth help us to see these businesses in a different light than the wider market. Hard to replicate skills, ownership of constrained supply and effective capital deployment may set the best businesses far apart from their peers in this once-in-a-generation rebuild.

Risk factors

The views expressed should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions.

This communication was produced and approved in November 2025 and has not been updated subsequently. It represents views held at the time of writing and may not reflect current thinking.

Potential for profit and loss

All investment strategies have the potential for profit and loss, your or your clients’ capital may be at risk. Past performance is not a guide to future returns.

This communication contains information on investments which does not constitute independent research. Accordingly, it is not subject to the protections afforded to independent research, but is classified as advertising under Art 68 of the Financial Services Act (‘FinSA’) and Baillie Gifford and its staff may have dealt in the investments concerned.

All information is sourced from Baillie Gifford & Co and is current unless otherwise stated.

The images used in this communication are for illustrative purposes only.

Important information 

Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). Baillie Gifford & Co Limited is an Authorised Corporate Director of OEICs.

Baillie Gifford Overseas Limited provides investment management and advisory services to non-UK Professional/Institutional clients only. Baillie Gifford Overseas Limited is wholly owned by Baillie Gifford & Co. Baillie Gifford & Co and Baillie Gifford Overseas Limited are authorised and regulated by the FCA in the UK.

Persons resident or domiciled outside the UK should consult with their professional advisers as to whether they require any governmental or other consents in order to enable them to invest, and with their tax advisers for advice relevant to their own particular circumstances.

Financial intermediaries

This communication is suitable for use of financial intermediaries. Financial intermediaries are solely responsible for any further distribution and Baillie Gifford takes no responsibility for the reliance on this document by any other person who did not receive this document directly from Baillie Gifford.

Europe

Baillie Gifford Investment Management (Europe) Ltd (BGE) is authorised by the Central Bank of Ireland as an AIFM under the AIFM Regulations and as a UCITS management company under the UCITS Regulation. BGE also has regulatory permissions to perform Individual Portfolio Management activities. BGE provides investment management and advisory services to European (excluding UK) segregated clients. BGE has been appointed as UCITS management company to the following UCITS umbrella company; Baillie Gifford Worldwide Funds plc. BGE is a wholly owned subsidiary of Baillie Gifford Overseas Limited, which is wholly owned by Baillie Gifford & Co. Baillie Gifford Overseas Limited and Baillie Gifford & Co are authorised and regulated in the UK by the Financial Conduct Authority.

Hong Kong

Baillie Gifford Asia (Hong Kong) Limited 柏基亞洲(香港)有限公司 is wholly owned by Baillie Gifford Overseas Limited and holds a Type 1 license from the Securities & Futures Commission of Hong Kong to market and distribute Baillie Gifford’s range of collective investment schemes to professional investors in Hong Kong. Baillie Gifford Asia (Hong Kong) Limited 柏基亞洲(香港)有限公司 can be contacted at Suites 2713-2715, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. Telephone +852 3756 5700.

South Korea

Baillie Gifford Overseas Limited is licensed with the Financial Services Commission in South Korea as a cross border Discretionary Investment Manager and Non-discretionary Investment Adviser.

Japan

Mitsubishi UFJ Baillie Gifford Asset Management Limited (‘MUBGAM’) is a joint venture company between Mitsubishi UFJ Trust & Banking Corporation and Baillie Gifford Overseas Limited. MUBGAM is authorised and regulated by the Financial Conduct Authority.

Australia

Baillie Gifford Overseas Limited (ARBN 118 567 178) is registered as a foreign company under the Corporations Act 2001 (Cth) and holds Foreign Australian Financial Services Licence No 528911. This material is provided to you on the basis that you are a “wholesale client” within the meaning of section 761G of the Corporations Act 2001 (Cth) (“Corporations Act”).  Please advise Baillie Gifford Overseas Limited immediately if you are not a wholesale client.  In no circumstances may this material be made available to a “retail client” within the meaning of section 761G of the Corporations Act.

This material contains general information only.  It does not take into account any person’s objectives, financial situation or needs.

South Africa

Baillie Gifford Overseas Limited is registered as a Foreign Financial Services Provider with the Financial Sector Conduct Authority in South Africa.

North America

Baillie Gifford International LLC is wholly owned by Baillie Gifford Overseas Limited; it was formed in Delaware in 2005 and is registered with the SEC. It is the legal entity through which Baillie Gifford Overseas Limited provides client service and marketing functions in North America. Baillie Gifford Overseas Limited is registered with the SEC in the United States of America.

The Manager is not resident in Canada, its head office and principal place of business is in Edinburgh, Scotland. Baillie Gifford Overseas Limited is regulated in Canada as a portfolio manager and exempt market dealer with the Ontario Securities Commission ('OSC'). Its portfolio manager licence is currently passported into Alberta, Quebec, Saskatchewan, Manitoba and Newfoundland & Labrador whereas the exempt market dealer licence is passported across all Canadian provinces and territories.

Israel

Baillie Gifford Overseas Limited is not licensed under Israel’s Regulation of Investment Advising, Investment Marketing and Portfolio Management Law, 5755–1995 (the Advice Law) and does not carry insurance pursuant to the Advice Law. This material is only intended for those categories of Israeli residents who are qualified clients listed on the First Addendum to the Advice Law.

Singapore

Baillie Gifford Asia (Singapore) Private Limited is wholly owned by Baillie Gifford Overseas Limited and is regulated by the Monetary Authority of Singapore as a holder of a capital markets services licence to conduct fund management activities for institutional investors and accredited investors in Singapore. Baillie Gifford Overseas Limited, as a foreign related corporation of Baillie Gifford Asia (Singapore) Private Limited, has entered into a cross-border business arrangement with Baillie Gifford Asia (Singapore) Private Limited, and shall be relying upon the exemption under regulation 4 of the Securities and Futures (Exemption for Cross-Border Arrangements) (Foreign Related Corporations) Regulations 2021 which enables both Baillie Gifford Overseas Limited and Baillie Gifford Asia (Singapore) Private Limited to market the full range of segregated mandate services to institutional investors and accredited investors in Singapore.