America’s AI boom hits a transformer crunch

The US economy is increasingly tied to data centers and the AI boom. There's just one problem: The electrical equipment needed to bring facilities online is hard to come by.

It's already creating delays and forcing developers to get creative with how they source equipment. Today's newsletter dives deep into one of the most pressing issues facing data centers today. Plus, the God Squad has passed judgment on the fate of endangered species in the Gulf of Mexico.

'A pretty wild puzzle'

By Emily Forgash and Akshat Rathi

In the red dirt of Abilene, Texas, more than 6,000 workers travel around on electric buggies, spending day and night constructing a massive data center that will feed the world's growing artificial intelligence needs. When completed this year, the eight sprawling buildings — which OpenAI will use — will consume 1.2 gigawatts of power, or enough electricity for nearly 1 million American households.

As the global AI race heats up, there is a huge rush to build data centers fast. There's no lack of money chasing these projects, with tech giants Alphabet Inc., Amazon.com, Meta Platforms Inc. and Microsoft Corp. committed to spending more than $650 billion this year alone. Yet neither ambition nor capital is enough to materialize all the necessary components.

Almost half of the US data centers planned for this year are expected to be delayed or canceled. One big reason is the shortage of electrical equipment, such as transformers, switchgear and batteries. They are needed not just for powering AI, but also for building out the grid that is seeing increased consumption from electric cars and heat pumps. US manufacturing capacity for these devices cannot keep up with demand, and the scarcity has caused data center builders to rely on imports.

Electrification is a key solution to both tackling climate change and powering AI ambitions. But America's AI prowess on computer chips and cutting-edge software is being hamstrung by the country's inability to manufacture the electrical parts. "There's not enough domestic capacity to go around, so people are pretty much forced to go to the export market," says Benjamin Boucher, senior analyst with Wood Mackenzie.

Crusoe Energy Systems won the contract to build the Texas data center campus because it promised speed. The secret to achieving that was buying enough of the right electrical equipment through early orders, securing some supplies before export barriers were erected.

Photographer: Kyle Grillot/Bloomberg

Electrical infrastructure adds up to less than 10% of the total cost of the data center, but it's impossible to build the operation without it. "If one piece of your supply chain is delayed, then your whole project can't deliver," says Andrew Likens, Crusoe's energy and infrastructure lead. "It is a pretty wild puzzle at the moment."

Over the past 10 years, the US government has tried a series of policies to reshore manufacturing, but they haven't yet yielded a significant boost to domestic capacity, forcing businesses to look to China regardless of the tariffs or the alleged national security risk. That means the US needs crucial parts from China to dominate it in the AI race, while China needs advanced chips from American companies to stay in the race.

Data centers have rapidly grown in size and now consume more electricity than their predecessors a decade ago. That demands bigger transformers, which safely pull electricity from the high-voltage grid to feed to tiny computer chips. Without the right transformers, there's no way to make the data center work.

Photographer: Erik Isakson/Tetra Images/Getty Images via Tetra images RF

Before 2020, these high-power transformers typically arrived 24 to 30 months after an order was placed. Those timelines were "totally manageable in the old world" when data centers didn't need such large transformers or at such short timelines, says Philippe Piron, chief executive officer of GE Vernova's electrification division. But AI companies "want something typically in less than 18 months."

The spike in demand from data centers and grid expansion have pushed up prices and extended delivery times to as much as five years. That is why some, like Crusoe, have even resorted to refurbishing old transformers from shuttered power plants as a stopgap measure.

Read the full story to see how data centers are sourcing other equipment and the risks of severing ties with Chinese manufacturers completely.

Transformer troubles

Taking it slow

Playing God

By Zahra Hirji

The Endangered Species Committee, a little-used panel of US senior federal agency leaders, on Tuesday exempted oil and gas drilling in the Gulf of Mexico from sweeping endangered species protections, citing reasons of national security.

Dubbed the God Squad, the committee has the power to effectively condemn a species to extinction by revoking environmental protections. The group, which hadn't met in more than 30 years, had only previously issued exemptions twice before and for specific projects that threatened specific species: in 1979 for whooping cranes in Wyoming and in 1992 for northern spotted owls in Oregon.

Photographer: NOAA Fisheries (Permit #14450)

Tuesday's decision goes much further than past cases. It applies an exemption from Endangered Species Act protections broadly to oil and gas exploration, development and production across the Gulf of Mexico, home to several threatened animals, including the Rice's whale. It's also the first time the committee has issued an exemption for reasons of national security, thrusting the process into unprecedented territory.

Read the full story.

This week's Zero episode

Zack Polanski is challenging the notion that you can't be Green and a popular politician. Since he became the leader of the UK's Green Party in September 2025, he has run a campaign that's pushed his party ahead of the incumbent Labour Party and opposition Conservative Party in some polls. It's a remarkable rise in a short span of time. How did he pull it off — and what will he do if the Green Party gets into power?

Listen now, and subscribe on Apple, Spotify or YouTube to get new episodes of Zero every Thursday.

More from Green

Photographer: Jeremy Suyker/Bloomberg

The EU proposed a limited adjustment to its carbon trading program to curb the impact of emissions costs on soaring energy bills, and pledged flexibility to avoid placing an excessive burden on industry during a transition to cleaner technologies.

Energy prices are at the top of the bloc's political agenda as concerns over its declining competitiveness compared to China and the US have been exacerbated by tensions in the Middle East. The European Commission offered to make supply controls in the EU Emissions Trading System more flexible and floated concessions on free carbon permits for heavy industry.

Read the full story on the proposal on Bloomberg.

Palmer Luckey-backed nuclear startup has raised fresh capital at a valuation of $2 billion, according to people familiar with the matter. Valar Atomics brought in $110 million in debt and $340 million in equity.

FirstRand sold a 2.5 billion rand ($149 million) bond that rewards investors based on improvements in a Cape Town water-catchment area, measured by the removal of invasive vegetation.

Europe faces weeks of volatile spring weather, with competing atmospheric factors raising the risk of cold spells, storms and late-season snow.

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