Billionaire bond investor Jeffrey Gundlach is warning that the artificial intelligence boom is beginning to show visible strain at the local level, as massive data center buildouts drive electricity prices higher in key US states.
In a new video update, the “Bond King” and DoubleLine Capital founder points to a clear inflection point in power markets that coincides with the launch of ChatGPT in late 2022.
Gundlach says the surge in AI-related infrastructure investment has created a growing divide between states hosting large concentrations of data centers and the rest of the country. The billionaire highlights electricity pricing data before and after November 30, 2022, the release date of ChatGPT-3.5.
“We just had this explosion in data center private investment. The vertical dotted line here is the ChatGPT-3.5 release. At that point in time, the nationwide average electricity prices were virtually the same as those of the top five states with the most data centers. But all of a sudden, thanks to ChatGPT and everything that’s going on with AI requiring all this electricity, we see that the national average hasn’t changed much at all since November of 2022, but the top five states with the most data centers have had a quite significant price increase, and that appears to be accelerating.”
Gundlach stresses that the disparity is becoming more pronounced when looking specifically at residential power bills, not just industrial or wholesale rates.
“So this is another thing that is dividing the country. You’ve got certain states that are getting very high electricity costs. And my last slide shows the residential electricity prices. The national average has definitely gone up, but the top five states have increased much more.”
Gundlach warns that rising power costs are beginning to translate into public resistance against new data center projects, particularly in communities that feel they are absorbing the costs without sharing proportionally in the benefits.
“The states that are having the most data centers are going to start getting pushback, I think. Not in my neighborhood. We’re already seeing demonstrations in some places where data centers are being opposed because people who live there know it’s going to be correlated with rising electricity costs.”
In October, billionaire Chamath Palihapitiya warned that electricity rates in the US could double in the next five years amid the data center buildout if the government fails to address power grid constraints.
Disclaimer: Opinions expressed at CapitalAI Daily are not investment advice. Investors should do their own due diligence before making any decisions involving securities, cryptocurrencies, or digital assets. Your transfers and trades are at your own risk, and any losses you may incur are your responsibility. CapitalAI Daily does not recommend the buying or selling of any assets, nor is CapitalAI Daily an investment advisor. See our Editorial Standards and Terms of Use.