BlackRock and Microsoft plan US$30b fund to invest in AI energy infrastructure

Artificial intelligence is placing huge demands on data and power supplies. Photo / Getty Images

BlackRock is preparing to launch a more than US$30 billion artificial intelligence investment fund with technology giant Microsoft to build data centres and energy projects to meet growing demands stemming from AI.

The financial partnership, which BlackRock is launching with its new infrastructure investment unit, Global Infrastructure Partners, would be one of the biggest investment vehicles ever raised on Wall Street. Microsoft and MGX, the Abu Dhabi-backed investment company, are general partners in the fund. Nvidia, the fast-growing chipmaker, will advise on factory design and integration.

The investment vehicle is aimed at addressing the staggering power and digital infrastructure demands of building AI products that are expected to face severe capacity bottlenecks in coming years. The computing power of AI requires far more energy than previous technological innovations and has strained existing energy infrastructure.

Dubbed the Global AI Investment Partnership, the effort seeks to raise up to US$30b in equity investments and leverage that to support up to an additional US$70b in debt financing.

The fund would mark GIP’s first big fund since the private infrastructure investment group agreed to be acquired by BlackRock for US$12.5b earlier this year. That deal is due to close in October.

BlackRock, the world’s largest money manager, has highlighted the energy sector as one of its top opportunities for growth.

“Mobilising private capital to build AI infrastructure like data centres and power will unlock a multitrillion-dollar long-term investment opportunity,” Larry Fink, BlackRock chief executive, said in a statement.

The soon-to-be launched fund is the latest vehicle created by a large asset manager to meet the ever-growing demand for energy to power generative AI and cloud computing. Earlier this year Microsoft agreed to back $10b in renewable electricity projects built by Canada’s Brookfield Asset Management. Microsoft has made a commitment to ensure 100% of its energy consumption is matched by zero carbon energy purchases by 2030.

“The country and the world are going to need more capital investment to accelerate the development of the AI infrastructure needed. This kind of effort is an important step,” Microsoft president Brad Smith said.

MGX was created earlier this year with the backing of Abu Dhabi’s sovereign wealth fund Mubadala to advance the country’s progress in AI. It has been in talks to invest in Open AI’s next funding round.

In 2017, Blackstone announced plans for a US$40b infrastructure vehicle with backing from Saudi Arabia, and Brookfield last year raised US$28b for what was described as the largest-ever infrastructure fund.

The International Energy Agency estimates global electricity consumption by data centres could surpass 1000 terawatt-hours by 2026, more than twice the amount used in 2022.

“Accelerated computing and generative AI are driving a growing need for AI infrastructure for the next industrial revolution,” Jensen Huang, Nvidia’s founder, said in a statement.

In the US, which hosts one-third of the world’s data centres, electricity demand is rising rapidly for the first time in two decades, driven partly by these energy-intensive facilities. A report from Grid Strategies indicates that five-year projections for electricity demand growth in the US have nearly doubled over the past year, increasing from 2.6 per cent to 4.7 per cent.

“There is a clear need to mobilise significant amounts of private capital to fund investments in essential infrastructure,” Bayo Ogunlesi, GIP’s chief executive, said in a statement.

Written by: Brooke Masters, Antoine Gara and James Fontanella-Khan in New York and Stephen Morris in San Francisco

© Financial Times