From SemiAnalysis, December 30:
Bring Your Own Generation, Sayonara Electric Grid, Turbines vs. Recips. vs. Fuel Cells, Why Not Build More CCGTs?, Onsite Power TCO
The Grid is Old and Tired
Nearly two years ago, we were the first to predict a looming power crunch. In our report AI Datacenter Energy Dilemma - Race for AI Datacenter Space, we forecasted AI Power Demand in the US to grow from ~3GW in 2023 to over 28GW by 2026 – a pressure that would overwhelm America’s supply chains. Our prediction proved very accurate.
The chart below tells the story: in Texas alone, tens of gigawatts of datacenter load requests pour in each month. Yet in the past 12 months, barely more than a gigawatt has been approved. The grid is sold out.
Source: ERCOT 2024 Large Flexible Load Task Force (LFLTF)
However, AI infrastructure cannot wait for the grid’s multiyear transmission upgrades. An AI cloud can generate revenue of $10-12 billion dollars per gigawatt, annually. Getting a 400 MW datacenter online even six months earlier is worth billions. Economic need dwarfs problems like an overloaded electric grid. The industry is already searching for new solutions.
Eighteen months ago, Elon Musk shocked the datacenter industry by building a 100,000-GPU cluster in four months. Multiple innovations enabled this incredible achievement, but the energy strategy was the most impressive. xAI entirely bypassed the grid and generated power onsite, using truck-mounted gas turbines and engines. As shown below, xAI has already deployed over 500MW of turbines near its datacenters. In a world where AI Labs are racing to be first with a Gigawatt datacenter, speed is the moat.
One by one, hyperscalers and AI Labs are following suit and temporarily abandoning the grid to build their own onsite power plant. As we discussed months ago in the Datacenter Model, in October 2025, OpenAI and Oracle placed the largest order ever for onsite gas generation, with a 2.3GW plant in Texas. The market for onsite gas generation is entering an era of triple-digit growth annual growth.
The beneficiaries extend far beyond the usual suspects. Yes, GE Vernova and Siemens Energy have seen their stocks surge. But we’re witnessing an unprecedented wave of new entrants, such as:
Doosan Enerbility, the Korean industrial giant, timing its H-class turbine launch perfectly. It already booked a 1.9GW order to serve Elon’s xAI - as we exclusively unpacked to our Datacenter Industry Model subscribers several weeks ago.
Wärtsilä, historically a ship engine manufacturer, realized the same engines that power cruise ships can power large AI clusters. It has already signed 800MW of US datacenter contracts.
Boom Supersonic—yes, the supersonic jet company—announced a 1.2 GW turbine contract with Crusoe, treating the margin from datacenter power generation as another round of funding for their Mach 2 passenger jets.
To understand growth and market share by supplier, we built a building-by-building tracker of sites deploying onsite gas in our Datacenter Model. The results surprised us: 12 different suppliers have now secured >400 MW of datacenter orders each in the US alone, for onsite gas generation....
....MUCH MORE
Previously from SemiAnalysis:
October 8, 2024 - Chips and Data Centers: "AI Neocloud Playbook and Anatomy"
February 7 2025 - SemiAnalysis: "DeepSeek Debates: Chinese Leadership On Cost, True Training Cost, Closed Model Margin Impacts"
March 29 - "America Is Missing The New Labor Economy – Robotics Part 1"
July 13 - ZuckAI: "Meta Superintelligence – Leadership Compute, Talent, and Data" (META)
September 22 - Elon Musk's "xAI’s Colossus 2 – First Gigawatt Datacenter In The World, Unique RL Methodology, Capital Raise"
November 14 - "Microsoft's AI Strategy Deconstructed - From Energy to Tokens" (MSFT)
December 14 - Chips: "AWS Trainium3 Deep Dive | A Potential Challenger Approaching" (AMZN; NVDA)
