For American AI researchers, that’s almost unimaginable. In the U.S., surging AI demand is colliding with a fragile power grid, the kind of extreme bottleneck that Goldman Sachs warns could severely choke the industry’s growth.

In China, Ma continued, it’s considered a “solved problem.”

Ma, a renowned expert in Chinese technology and founder of the media company Tech Buzz China, took her team on the road to get a firsthand look at the country’s AI advancements. She told Fortune that while she isn’t an energy expert, she attended enough meetings and talked to enough insiders to come away with a conclusion that should send chills down the spine of Silicon Valley: in China, building enough power for data centers is no longer up for debate.

“This is a stark contrast to the U.S., where AI growth is increasingly tied to debates over data center power consumption and grid limitations,” she wrote on X.

The stakes are difficult to overstate. Data center building is the foundation of AI advancement, and spending on new centers now displaces consumer spending in terms of impact to U.S. GDP—that’s concerning since consumer spending is generally two-thirds of the pie. McKinsey projects that between 2025 and 2030, companies worldwide will need to invest $6.7 trillion into new data center capacity to keep up with AI’s strain. 

In a recent research note, Stifel Nicolaus warned of a looming correction to the S&P 500, since it forecasts this data-center capex boom to be a one-off build-out of infrastructure, while consumer spending is clearly on the wane.

However, the clear limiting factor to the U.S.’s data center infrastructure development, according to a Deloitte industry survey, is stress on the power grid. Cities’ power grids are so weak that some companies are just building their own power plants rather than relying on existing grids. The public is growing increasingly frustrated over increasing energy bills – in Ohio, the electricity bill for a typical household has increased at least $15 this summer from the data centers – while energy companies prepare for a sea-change of surging demand. 

Goldman Sachs frames the crisis simply: “AI’s insatiable power demand is outpacing the grid’s decade-long development cycles, creating a critical bottleneck.” 

Meanwhile, David Fishman, a Chinese electricity expert who has spent years tracking their energy development, told Fortune that in China, electricity isn’t even a question. On average, China adds more electricity demand than the entire annual consumption of Germany, every single year. Whole rural provinces are blanketed in rooftop solar, with one province matching the entirety of India’s electricity supply. 

“U.S. policymakers should be hoping China stays a competitor and not an aggressor,” Fishman said. “Because right now they can’t compete effectively on the energy infrastructure front.”

China has an oversupply of electricty

China’s quiet electricity dominance, Fishman explained, is the result of decades of deliberate overbuilding and investment in every layer of the power sector, from generation to transmission to next-generation nuclear.

The country’s reserve margin has never dipped below 80%–100% nationwide, meaning it has consistently maintained at least twice the capacity it needs, Fishman said. They have so much available space that instead of seeing AI data centers as a threat to grid stability, China treats them as a convenient way to “soak up oversupply,” he added.

That level of cushion is unthinkable in the United States, where regional grids typically operate with a 15% reserve margin and sometimes less, particularly during extreme weather, Fishman said. In places like California or Texas, officials often issue warnings about red-flag conditions when demand is projected to strain the system. This leaves little room to absorb the rapid load increases AI infrastructure requires, Fishman ntoed. 

The gap in readiness is stark: while the U.S. is already experiencing political and economic fights over whether the grid can keep up, China is operating from a position of abundance.

Even if AI demand in China grows so quickly renewable projects can’t keep pace, Fishman said, the country can tap idle coal plants to bridge the gap while building more sustainable sources. “It’s not preferable,” he admitted, “but it’s doable.”

By contrast, the U.S. would have to scramble to bring on new generation capacity, often facing years-long permitting delays, local opposition, and fragmented market rules, he said. 

Structural governance differences

Underpinning the hardware advantage is a difference in governance. In China, energy planning is coordinated by long-term, technocratic policy that defines the market’s rules before investments are made, Fishman said. This model ensures infrastructure buildout happens in anticipation of demand, not in reaction to it.

“They’re set up to hit grand slams,” Fishman noted. “The U.S., at best, can get on base.”

In the U.S., large-scale infrastructure projects depend heavily on private investment, but most investors expect a return within three to five years: far too short for power projects that can take a decade to build and pay off.

“Capital is really biased toward shorter-term returns,” he said, noting Silicon Valley has funneled billions into “the nth iteration of software-as-a-service” while energy projects fight for funding. 

In China, by contrast, the state directs money toward strategic sectors in advance of demand, accepting not every project will succeed but ensuring the capacity is in place when it’s needed. Without public financing to de-risk long-term bets, he argued, the U.S. political and economic system is simply not set up to build the grid of the future.

Cultural attitudes reinforce this approach. In China, renewables are framed as a cornerstone of the economy because they make sense economically and strategically, not because they carry moral weight. Coal use isn’t cast as a sign of villainy, as it would be among some circles in the U.S. –  it’s simply seen as outdated. This pragmatic framing, Fishman argued, allows policymakers to focus on efficiency and results rather than political battles.

For Fishman, the takeaway is blunt. Without a dramatic shift in how the U.S. builds and funds its energy infrastructure, China’s lead will only widen.

“The gap in capability is only going to continue to become more obvious — and grow in the coming years,” he said.

Vertiv (VRT 1.03%), a global supplier of critical digital infrastructure and services for data centers and communication networks, released its second quarter results on July 30, 2025. The release detailed record GAAP revenue gains and a significant beat on non-GAAP earnings expectations. Revenue (GAAP) reached $2,638 million, compared to the analyst consensus of $2,353.9 million. Adjusted diluted earnings per share were $0.95, outpacing the $0.83 consensus. This performance was driven by surging demand for data center solutions, particularly in the Americas and Asia Pacific regions. Despite impressive sales and profit growth, higher supply chain and tariff-related costs pressured adjusted operating margins. Overall, the quarter showcased Vertiv’s strong market traction and its ability to capitalize on accelerating trends in the digital infrastructure space.

Source: Analyst estimates provided by FactSet. Management expectations based on management’s guidance, as provided in Q1 2025 earnings report.

About Vertiv: Business Model and Strategic Focus

Vertiv provides foundational technologies for digital infrastructure. Its portfolio includes power management products, thermal management systems, racks, enclosures, and remote monitoring solutions. These products are essential for data centers, communication networks, and key industrial applications where uptime and performance are critical.

The company’s recent strategic focus includes expanding its product innovation—especially in areas needed for artificial intelligence (AI) and cloud deployments—while investing in its global supply chain and manufacturing footprint. By strengthening relationships with large data center operators and technology leaders, Vertiv positions itself as a go-to partner for reliable infrastructure. Its ability to deliver on a growing backlog and execute on large-scale projects is considered central to its continued success.

Quarterly Highlights: Performance Drivers and Key Metrics

The period saw Vertiv exceed revenue and earnings expectations, reflecting exceptional demand for its digital infrastructure solutions. Organic orders expanded by roughly 15 % compared to the prior year, and the company’s backlog surged to a record $8.5 billion as of Q2 2025—supported by a book-to-bill ratio of approximately 1.2x. Backlog and order strength signal continued future revenue and underline growing industry reliance on Vertiv as the market for data centers rapidly evolves.

By region, the Americas segment led growth with net sales up 42.9% (GAAP), buoyed by robust North American data center investment. Adjusted operating profit in this region increased by 34.9% compared to Q2 2024. Services & spares in the Americas were up 22.9% year-over-year for the three months ended June 30, 2025. However, additional costs from tariffs and supply chain reconfiguration led to some margin compression—adjusted operating margin in the Americas fell by 1.4 percentage points compared to Q2 2024.

The Asia Pacific segment also posted substantial gains. Net sales increased 35.1% year-over-year. Adjusted operating profit in Asia Pacific jumped 83.3%, and adjusted operating margin improved by 2.7 percentage points year over year. While service revenue growth trailed that of product sales, both areas contributed positively.

In Europe, Middle East, and Africa (EMEA), net sales grew 12.5%. Management noted that EMEA pipelines remain robust and are growing.

Innovation, Operations, and Material Events

Product innovation remains a mainstay of Vertiv’s strategy, underlined by high R&D investment and recent collaboration announcements. The company continued to invest in engineering and research for its next-generation AI-optimized infrastructure. Its cooling systems, modular power solutions, and integrated white-space products are designed for demanding applications in hyperscale and AI-driven data centers. Vertiv also announced plans to acquire Great Lakes Data Racks & Cabinets, extending its portfolio in high-density racks and enclosures. This acquisition was not reflected in the current quarter’s guidance and results.

Though order momentum was strong, the quarter was not without headwinds. Tariff-related expenses and the cost of rapidly shifting the company’s manufacturing footprint to mitigate those tariffs weighed on margins. Management called these pressures temporary, and reiterated a plan including commercial pricing actions and supply chain reconfiguration. According to company leaders, these countermeasures should reduce the impact of tariffs toward the end of the year, but margin pressure persisted for the quarter.

On the cash flow front, adjusted free cash flow was $277 million—down 17.7% from the prior year quarter—largely due to working capital investments to support growth. Operating cash flow (GAAP) also declined versus a very strong prior year period. Still, on a year-to-date basis, adjusted free cash flow had increased 24%.

The company also did not repurchase shares, choosing instead to retain financial flexibility for future acquisitions and to maintain a conservative balance sheet.

Looking Ahead: Guidance and Key Watch Areas

Vertiv raised its financial outlook for FY2025 across most major non-GAAP metrics. For the full year 2025, the company now expects net sales between $9.93 billion and $10.08 billion, organic growth of 23 % to 25 %, adjusted operating profit (non-GAAP) of $1.95 billion to $2.03 billion, and adjusted earnings per share of $3.75 to $3.85. Guidance for adjusted free cash flow (non-GAAP) is $1.375 billion to $1.425 billion. However, management revised its margin outlook downward, with adjusted operating margin (non-GAAP) now forecast between 19.7% and 20.3%, a decrease from earlier targets.

For Q3 2025, projections include net sales of $2,510 million to $2,590 million, 20 % to 24 % organic growth, and adjusted EPS between $0.94 and $1.00. Management cautioned that these expectations do not factor in any impacts from proposed tariffs that may take effect after July 28, 2025, as regulatory clarity on additional trade policies is still pending. Vertiv’s large backlog, ongoing tariff mitigation, and continued investment in manufacturing and product development will be central areas for investors to watch in the coming quarters.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

JesterAI is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. All articles published by JesterAI are reviewed by our editorial team, and The Motley Fool takes ultimate responsibility for the content of this article. JesterAI cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The data center industry is standing in front of major expansion due to the unbending popularity of artificial intelligence (AI). Despite that, top sector name Equinix (EQIX -9.56%) has been having a rough few days on the stock exchange of late, especially following its analyst day event on Wednesday.

All told, according to data compiled by S&P Global Market Intelligence, week-to-date as of Thursday night, the company’s share price was down by almost 16%.

Some growth to be gobbled by capex

No investor likes to hear that one of their investments might experience a slump in its growth rates. Yet that’s exactly what happened with Equinix; on analyst day, it proffered guidance for its adjusted funds from operations (AFFO), the key profitability line item for real estate investment trusts (REITs) like itself. Management is forecasting 5% to 9% annual growth from 2025 through 2029.

The No. 1 reason for this is that the heavy demand for artificial intelligence (AI) capabilities requires significant expansion in data center capacity. So, a company like Equinix that specializes in such facilities is essentially forced to spend now to reap the benefits later.

Regardless, analysts didn’t hesitate to become more bearish on the company. In fact, several institutions (such as Raymond James and BMO Capital Markets) downgraded their recommendations on the stock.

Still a long-term winner

Personally, I don’t think that’s fair. Intensifying capital expenditure requirements are entirely justified, given that so many developers and end users want robust AI functionality as soon as humanly possible, without bottlenecks. It’s data center operators like Equinix that have to pay up front for this, at least at the current stage.

This stock’s double-digit dip is, therefore, a good opportunity to buy a good company cheaply, in my view. Yes, profitability will be dinged for a while, but I think Equinix has great potential for patient investors who are willing to wait it out over the long term.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Equinix. The Motley Fool has a disclosure policy.