America's AI build-out stumbles on electrical parts shortage and China dependency

America's AI Build-Out Hinges on Chinese Electrical Parts

In the red dirt of Abilene, Texas, more than 6,000 workers travel around on electric buggies, spending day and night constructing a massive data center that will feed the world's growing artificial intelligence needs. When completed this year, the eight sprawling buildings -- which OpenAI will use -- will consume 1.2 gigawatts of power, or enough electricity for nearly 1 million American households. As the global AI race heats up, there is a huge rush to build data centers fast. There's no lack of money chasing these projects, with tech giants Alphabet Inc., Amazon.com, Meta Platforms Inc. and Microsoft Corp. committed to spending more than $650 billion this year alone. Yet neither ambition nor capital is enough to materialize all the necessary components for these power-hungry computers. Almost half of the US data centers planned for this year are expected to be delayed or canceled. One big reason is the shortage of electrical equipment, such as transformers, switchgear and batteries. They are needed not just for powering AI, but also for building out the grid that is seeing increased consumption from electric cars and heat pumps. US manufacturing capacity for these devices cannot keep up with demand, and the scarcity has caused data center builders to rely on imports. Electrification is a key solution to both tackling climate change and powering AI ambitions. But America's AI prowess on computer chips and cutting-edge software is being hamstrung by the country's inability to manufacture the electrical parts. "There's not enough domestic capacity to go around, so people are pretty much forced to go to the export market," says Benjamin Boucher, senior analyst with Wood Mackenzie. The import dependence is putting data center companies in a bind. "There's only going to be one winner," President Donald Trump said in December, "and that's probably going to be the US or China." While he wants the US to win, his America First doctrine calls for installing trade barriers to cut imports. Data centers consuming as much as 12 gigawatts of power are supposed to come online in 2026 in the US, according to analysts at think tank Sightline Climate, who will be releasing a new report in the coming weeks. However, only a third of that is currently under construction, Sightline estimates. Crusoe Energy Systems won the contract to build the Texas data center campus because of its promise of speed. Cully Caveness, Crusoe's chief strategy officer, says the company pledged to get a portion of the data center powered up in less than a year after starting construction. The secret to achieving that was buying enough of the right electrical equipment through early orders, securing some supplies before export barriers were erected. Electrical infrastructure adds up to less than 10% of the total cost of the data center, but it's impossible to build the operation without it. "If one piece of your supply chain is delayed, then your whole project can't deliver," says Andrew Likens, Crusoe's energy and infrastructure lead. "It is a pretty wild puzzle at the moment." Most companies contacted by Bloomberg News declined to comment on the problems they are facing or where they source their equipment from. The few that responded highlighted the solutions they have enacted. Spokespeople for Amazon and Microsoft said they plan electrical equipment procurement ahead of time when building their data centers, and a spokesperson for Equinix Inc. pointed to a recent investment in a manufacturing facility that makes switchgear. Google, Oracle, Nebius Group NV, and Coreweave Inc. declined requests to comment. Though few companies are eager to talk about it, the US has been outsourcing its manufacturing to other countries, primarily China, for decades. That has contributed to a significant shortage of electrical components in the US, says WoodMac's Boucher. In January, a group of US utility executives visited a transformer factory in China as part of a tour of Chinese electricity and technology plants and noticed that around half the transformers slated for delivery sported the US flag. Some were specifically going to data center companies, according to one person on the trip who requested anonymity to share commercially sensitive information. Over the past 10 years, the US government has tried a series of policies to reshore manufacturing, but they haven't yet yielded a significant boost to domestic capacity, forcing businesses to look to China regardless of the tariffs or the alleged national security risk. That means the US needs crucial parts from China to dominate it in the AI race, while China needs advanced chips from American companies to stay in the race. In March, Trump issued a new framework to speed up permitting of new power plants for data centers. Without addressing electrical equipment shortages, many are worried that the trillions of dollars of spending aimed at data centers won't yield the decisive steps the US must take to win the AI race. "We've seen firsthand the value it can create if you are not hamstrung by electrical infrastructure lead times," says Crusoe's Likens. "They can make or break a project." Data centers have rapidly grown in size and now consume more electricity than their predecessors a decade ago. That demands bigger transformers, which safely pull electricity from the high-voltage grid to feed to tiny computer chips. Without the right transformers, there's no way to make the data center work. Before 2020, these high-power transformers typically arrived 24 to 30 months after an order was placed. Those timelines were "totally manageable in the old world" when data centers didn't need such large transformers or at such short timelines, says Philippe Piron, chief executive officer of GE Vernova's electrification division. But AI companies "want something typically in less than 18 months." The spike in demand from data centers and grid expansion have pushed up prices and extended delivery times to as much as five years. That is why some, like Crusoe, have even resorted to refurbishing old transformers from shuttered power plants as a stopgap measure. In October, GE Vernova spent $5.3 billion to buy the remaining stake in Prolec, a transformer company, to fully acquire it. In February, Siemens Energy announced an investment of $1 billion to expand its US manufacturing capacity of transformers and gas turbines over the next two years. Neither immediately relieves demand, which forces data center developers to look abroad. While most of the US's transformers come from Canada, Mexico and South Korea, US utilities imported more than 8,000 high-power transformers in 2025 through October from China, up from fewer than 1,500 imported in all of 2022, estimates WoodMac's Boucher. This build-out "is going to be highly dependent on the import market," he says. Once transformers lower the voltage of electricity so it can be used in data centers, it then needs to be distributed across the data center safely. That's done through switchgear, which includes circuit breakers and fuses. There too, data center developers are seeing delivery delays - though not as extreme as the timelines for transformers. Equinix Inc.'s solution is to commit at least $350 million to support Hanley Energy's new manufacturing facility in Ireland, which will make switchgear and other data center components. Equinix expects to achieve 10% to 15% faster lead times as a result. Crusoe Energy's answer to that shortfall has been to pre-order lots of the equipment. That means spending many millions of dollars on supplies before the company even knows it has an order to fill, but it's proved a winning strategy. Recently, Crusoe also began manufacturing their own switchgear. To speed deployment, Crusoe started packaging the switchgear in what the company calls power distribution centers. The PDCs look like a shipping container that someone could live in - they have a sloped roof, gutters and a door, although no windows. Crusoe manufactures all parts of the building from the raw materials it buys, including the roof trusses, foundation and walls. Inside the PDCs are refrigerator-sized circuit breakers, like a much larger version of the breaker panels on the outside of houses. It now sells its PDC equipment to other data center companies. "We felt like that was a risk in the marketplace and wanted to kind of secure our own destiny," says Likens. With transformers and switchgear secured, the data center can open for business. But without additional equipment, the racks full of expensive computer chips could degrade quickly, and that's where lithium-ion batteries come in. The moment an office worker uploads a huge dataset and asks AI to analyze, it can cause a spike in electricity demand at a data center. That spike can cause the flow of electricity to change very quickly, which reduces the lifetime of the equipment. Lithium-ion batteries smooth out the sudden spikes in power consumption. They store extra electricity when there's too much and release it when there isn't enough, helping keep power steady and manage how servers use it. The share of US imports of transformers and switchgear from China has declined steadily in recent years - although for specific types of equipment that share is still hovering around 30%. The Chinese share of battery import volumes remains stubbornly above 40%. China dominates the supply of electrical equipment because it controls so many parts of the supply chain, from materials to processing to manufacturing, and the gulf between China and the US is set to widen. In its new five-year plan, the Asian giant revealed last month that it will double down on building out its grid with renewables, while the Trump administration has dismantled policies to deploy solar and wind power. In March, the US opened trade investigations into China to justify tariffs; the country then retaliated by starting its own investigations against the US. Rash attempts to end Chinese imports of electrical equipment would mean further delays and harm the US in the AI race, says Joshua Busby, a professor of public affairs at the University of Texas at Austin. "If we're too indiscriminate in our effort to diminish our reliance on China to zero, that could come at excessive cost to American companies," he says.

America's AI build-out hinges on Chinese electrical parts

In the red dirt of Abilene, Texas, more than 6,000 workers travel around on electric buggies, spending day and night constructing a massive data center that will feed the world's growing artificial intelligence needs. When completed this year, the eight sprawling buildings -- which OpenAI will use -- will consume 1.2 gigawatts of power, or enough electricity for nearly one million American households. As the global AI race heats up, there is a huge rush to build data centers fast. There's no lack of money chasing these projects, with tech giants Alphabet, Amazon, Meta and Microsoft committed to spending more than $650 billion this year alone. Yet neither ambition nor capital is enough to materialize all the necessary components for these power-hungry computers. Almost half of the U.S. data centers planned for this year are expected to be delayed or canceled. One big reason is the shortage of electrical equipment, such as transformers, switchgear and batteries. They are needed not just for powering AI, but also for building out the grid that is seeing increased consumption from electric cars and heat pumps. U.S. manufacturing capacity for these devices cannot keep up with demand, and the scarcity has caused data center builders to rely on imports.