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Roundtable: The Race to Power the AI Economy
Jun 26, 2026
A Morgan Stanley Institute roundtable explored how the rapid growth of AI and digital infrastructure is reshaping power demand, investment and markets.
Why It Matters
- The power market has shifted: The electricity market is facing a new reality of capacity constraints, particularly around grid infrastructure and power availability.
- Constraints need to be addressed quickly: The rapid growth of AI and digital infrastructure is not only redefining global power demand, investment and markets, but also forcing the energy ecosystem to find solutions to quickly address the issue of power scarcity.
- Innovation in power supply is becoming more strategic: Access to reliable, low-cost power is becoming a key enabler of industrial development, economic growth and regional competitiveness.
- Broad implications for investment, economic growth and regulation: These dynamics are driving a meaningful shift in how companies, policymakers and investors think about the development of energy systems, their impacts on communities and how capital should be deployed.
The Big Picture: The rapid growth of artificial intelligence is driving a structural shift in energy demand. The capacity to rapidly deploy reliable and affordable power has moved from an operational necessity to a strategic economic asset. At the same time, policymakers, utilities and businesses face increasing pressure to modernize regulatory frameworks and expand energy capacity in ways that balance innovation, affordability and community impact.
For decades, global energy demand remained relatively stable, supported by efficiency gains and steady economic growth. Today, however, the world is entering the early stages of a structural shift in power consumption—driven by the rapid expansion of artificial intelligence and data centers, accelerating electrification and the reshoring of industrial activity.
In the U.S., electricity demand is likely to rise at an annual average rate of 2.6% over the next decade, surpassing previous peaks, according to Morgan Stanley Research’s estimates. Data centers are projected to account for a significant share of that growth, reflecting the increasing power requirements of AI infrastructure.
“This is no longer just an energy story. It’s a story about the convergence of technology and infrastructure, where access to reliable, affordable power is becoming a key enabler of economic growth and U.S. competitiveness,” says Ellen Zentner, Chief Economic Strategist and Global Head of Thematic and Macro Investing at Morgan Stanley Wealth Management.
Zentner recently moderated a discussion convened by the Morgan Stanley Institute to examine how energy demand is evolving, where key constraints exist and what the implications may be for markets, investment and growth. The conversation brought together senior leaders from across the Firm:
- Stephen Byrd, Global Head of Thematic Research and Sustainability Research, Morgan Stanley Research
- Chris Ortega, Head of Americas, Infrastructure Partners, Morgan Stanley Investment Management
- Ray Spitzley, Vice Chairman, Global Power & Energy Banking, Morgan Stanley Investment Banking
Zentner on Investing in Energy
Zentner on Investing in Energy
These forces are driving a meaningful shift in how we think about energy systems and how capital is being deployed. We're seeing increasing investment across themes such as powering AI, natural gas, global energy markets, nuclear, grid modernization, clean energy and storage, and energy security more broadly.
At the same time, the nature of investing in this space is evolving. Speed of deployment, access to infrastructure, and long-term contracted revenues are becoming just as important as technology or scale. And success increasingly depends on disciplined asset level execution.
1. Reliability Becomes a Strategic Priority
While demand for compute rises at a non-linear rate, with Morgan Stanley Research estimating a sales increase of 200% per year, so does the need for electricity, creating mounting pressure on power systems and infrastructure.
Governments, utilities and technology companies are increasingly focused on securing reliable sources of energy to support the buildout of data centers and other AI-related infrastructure.
“They are in a race,” Byrd says. “But I am concerned that, although companies and policymakers are improving, they need to be moving even faster. I see a deficiency in terms of how much power they're going to get. It just doesn't look to be enough to me.”
Meeting that demand will likely require a diverse mix of energy sources. Natural gas is emerging as an important near-term solution because of its availability and scalability, while nuclear energy may play a larger role over the longer term as new capacity comes online. Battery storage and renewables are also expected to be critical components of the evolving energy ecosystem.
Ortega and Spitzley on Redundancy and Resilience
Chris Ortega:
We're [Morgan Stanley] focused on being good environmental stewards in terms of where we are. But in whatever we do, the lights need to go on. To raise a point in particular with data centers, you need kind of a constant flow of power and then you need backup power in terms of where you are as well.
So, building that redundancy and resiliency is a critical component to any of that development. Because if you have all of your GPUs in a data center and you're down even for a couple of seconds, that could be a very material impact to those hyperscalers in terms of where they sit.
We're looking for more and more creative solutions because we're no longer in an environment where we have the luxury of saying, exactly where do we want our electron to come from?
To keep the lights on, both for us as ratepayers and folks in our homes, but also for data centers, we really need it all at this point.
Ray Spitzley:
In the world we live in, everybody is going to be focused on high reliability. The hyperscalers, they are demanding five nines reliability (99.999%), meaning you can only be out for a very few minutes every year. So, you just think about the amount of equipment that needs to be there.
But interestingly to this point of technology innovation, creative solutions, what we are seeing is the role of batteries, that new battery configurations can play an important role. And then, because of the advances in batteries, many of these data centers, while they will have gas, as an important component for reliability, they will also have solar.
Wyoming, wind, solar. So all of that is going to be combined in new configurations that will be able to achieve both reliability and decarbonization.
2. Off-Grid Solutions Gain Momentum
The urgency of building out AI infrastructure is reflected in the scale of investment. The combined capital expenditures by the five largest U.S. technology companies could reach approximately $800 billion this year and $1.16 trillion by 2027, according to Morgan Stanley Research estimates.
For hyperscalers, delays in obtaining power for new data centers can create significant costs. As a result, many are pursuing “time-to-power” strategies that prioritize faster deployment through alternatives to the traditional electric grid.
The panelists agreed that off-grid power solutions are likely to become an increasingly important part of the infrastructure landscape.
“We’re going to find that, in fact, these off-grid solutions work incredibly well because of the smart engineering that’s going to go behind it,” Spitzley says.
Byrd and Ortega on Time-to-Power Solutions
Stephen Byrd
In the United States through 2028, we would need in the range of 80GW of data centers powered up. But then in context, the Philadelphia area uses about 3GW. So 80 is a lot. I'd say about 25GW will have grid access within that time period. But that leaves a huge amount – 55GW – that does not have sort of the standard ability to connect to the grid.
And so that's where all these sort of time-to-power solutions are coming into the picture. And this goes to what Chris said about getting equipment. Turbine islands: so where you create a turbine-based system serving just your data center. Very popular fuel cells are really great. They can be deployed quickly, highly reliable, we see excellent growth there.
Chris Ortega
The old model is not going to be the way we power data centers going forward. It won't be largely kind of a grid-based solution. So where we spend all of our time, whether it be the alternative technologies that we talked about, whether it be behind the meter, geography is also a big place where we focus on what other markets that aren't the focus today – where's the puck going?
And maybe it's not just in the United States, maybe it's also in Canada. How are we starting to stitch together some of these solutions? And then also how are all the stakeholders responding to this? As we talked about a couple of years ago, hyperscalers really didn't want to jump into this game. And now this is a core part of their strategy.
So how can we partner with them as well? It's another place where we spend a lot of time, because I think the go forward is just going to look a little bit different than what we've seen over the last five or 10 years.
3. Investment Opportunities Across the Power Value Chain
The surge in electricity demand has helped drive a significant increase in the value of energy-related assets. Independent power producers, for example, are up three times on a total-return basis over the last three years, according to Morgan Stanley Investment Management, as investors have increasingly recognized the importance of reliable power generation.
As capital continues to flow into the sector, investors are focusing not only on asset ownership but also on companies with proven development expertise and strong execution capabilities. The ability to deliver projects efficiently and at scale is becoming an increasingly important differentiator.
Ortega on Developing Power Assets
Chris Ortega
We're always looking where's there a little bit more risk-reward for us. So, in this environment we really focus on the development piece of things, because we think that there's an interesting arbitrage for where one could develop those unit economics today and then ultimately participate in that valuation environment in the future. And part of the reason why I think now is a really interesting inflection point is this whole conversation.
You're actually able to do that in a lower risk sort of way, because when you are going to develop these sites right now, you could get a hyperscaler to come on for a 10, 15, 20-year contract, depending on where you are. So you're really de-risking a lot of that development relative to where we would have been, you know, five years ago in terms of trying to pursue some of that.
So a big focus for us on development, a big focus for us on places where you could do it cheaply, efficiently, into the conversation quickly.
4. Regulation Remains a Key Challenge
Despite robust demand and unprecedented investment from hyperscalers, regulatory frameworks can slow the development of new power infrastructure.
Many state and local regulations were designed decades ago and may not fully reflect today’s economic, technological and market realities. As a result, permitting processes and other requirements can create obstacles for utilities and technology companies seeking to expand capacity.
At the same time, policymakers and industry participants are grappling with concerns that rising power and water demand from data centers could place upward pressure on electricity costs for consumers.
Stakeholders are increasingly exploring reforms that would accelerate infrastructure development while balancing the interests of local communities and ratepayers.
“We need to be able to find a way to reform the market completely,” Spitzley says. “Otherwise, the areas of the country that are unwilling to support the development of the tech and power infrastructure are going to fall behind those areas that are willing to go all in and find more creative solutions.”
Spitzley on Regulation
Ray Spitzley
At a surface level, electricity seems like the simplest industry in the world. You come home, you flip a switch, the lights come on. In fact, this is an incredibly arcane and complex business. Let's start with regulation. Every state in the United States has its own regulatory framework for how rates are set for residential and commercial customers.
There are key utility CEOs that are complaining that the current market design doesn't do what it was intended. And so I think part of the challenge and what we're going to need to do going forward is to change that regulatory paradigm, get people to the table to decide what changes can occur. And then, of course, you've talked about permitting, other issues.
The utility industry is really a hyper-local business, and I think it's one of the ironies that we have that a tech business that is so large and has been ruled by coding very clever technologies is at this point finding its fate very much tied to what can you do with picks and shovels? How do you get a local building permit?
How do you get people to allow you to use the fuel choice that you want locally, and get those workforces mobilized in an efficient fashion?
Takeaways
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For Investors:“The nature of investing in this space is evolving. Speed of deployment, access to infrastructure, and long-term contracted revenues are becoming just as important as technology or scale, and success increasingly depends on disciplined asset-level execution.”
Ellen Zentner, Chief Economic Strategist and Global Head of Thematic and Macro Investing at Morgan Stanley Wealth Management
“I'm focused on bottlenecks because, usually, clients make the most money when we're really thinking through how we knock through those bottlenecks. Which companies will come up with the most innovative, practical solutions that can be implemented very quickly? That is my number one focus.”
Stephen Byrd, Global Head of Thematic Research and Sustainability Research at Morgan Stanley Research
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For Companies:“Another big challenge in the power value chain is equipment. How does one get turbines or solar panels in a timely manner? Generally speaking, anything that we could do to expedite that timeline will make economic sense.”
Chris Ortega, Head of Americas, Infrastructure Partners at Morgan Stanley Investment Management
“One of the ironies that we have now is that the very large tech business is finding its fate very much tied to local regulations. How do they get a local building permit? How do they get local officials to allow them to use their fuel of choice and get workforces mobilized in an efficient fashion?”
Ray Spitzley, Vice Chairman, Global Power & Energy Banking at Morgan Stanley Investment Banking
“Companies are learning which solutions are more likely to take them to the finish line. They appreciate now the importance of politics, local stakeholder relations—not just at the national or state level—making sure communities really understand what they're doing and why they're doing it.”
Stephen Byrd, Global Head of Thematic Research and Sustainability Research at Morgan Stanley Research
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