An intensifying global trade war could pose significant challenges for the rapidly expanding data center industry, potentially stunting the growth of artificial intelligence (AI) technologies, according to a new report from the International Energy Agency (IEA).
In comments, Laura Cozzi, the IEA’s Director of Technology, said that rising tariffs and slower economic growth are among the key risks facing the sector. These factors are outlined in the agency’s latest “headwind scenario,” which projects a more restrained trajectory for AI and data center development compared to its baseline forecast.
“The headwind scenario encompasses many of the things we are seeing—slower economic growth, more tariffs in more countries,” Cozzi said. “Indeed, yes, the current tariff environment is a scenario in which AI would see slower growth than what we see in our base case.”
According to the report, the United States, China, and the European Union are expected to drive 80% of global data center demand growth by 2030, largely fueled by AI applications. In the IEA’s base case scenario, global electricity consumption from data centers is projected to surge to around 945 terawatt-hours (TWh) by 2030. However, under the headwind scenario, that figure could drop significantly to 670 TWh.
The U.S. is poised to lead global data center development, with the sector anticipated to account for nearly half of the country’s electricity demand growth over the next five years. This has prompted a wave of massive capacity requests from data center operators to utility companies—some exceeding existing peak demand or generation capacity. The IEA notes this could distort demand projections as tech firms approach multiple utilities simultaneously.
Cozzi emphasized the importance of industry collaboration to better understand the real scale of pending projects. “The report aims to work with tech companies and industry to make sense of the real queue for data centres, which is ultimately going to be essential for AI to get the electricity it needs,” she said.
The IEA also highlighted the strain this explosive growth could place on power grids, warning that about 20% of planned data center projects may face delays. The increasing demand for transmission infrastructure and critical grid components underscores the risk of supply chain constraints.
Additionally, the report pointed out that approximately half of all U.S. data centers currently in development are concentrated in a handful of large clusters, raising the likelihood of local bottlenecks that could hinder progress.
As the global race for AI dominance intensifies, the IEA’s findings serve as a cautionary reminder of the geopolitical and infrastructural hurdles that lie ahead.
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