How much power will AI consume?

More optimism around Chinese stocks. # # --------------------------------------------------------------- The key takeaways today: - Data centers will likely demand 160% more power by 2030 - May QuickPoll: Investors are turning bullish on Chinese equities - Early signs of AI-driven productivity gains look "very, very positive" - What US small business owners want from their electoral candidates - Impact investors can capitalize on AI and decarbonization - Briefings Brainteaser: Which was the only hedge fund strategy to see net inflows last quarter? Was this newsletter forwarded to you? [Sign up now](. --------------------------------------------------------------- AI is poised to drive 160% increase in data center power demand For years, data centers displayed a remarkably stable appetite for power, even as their workloads mounted. Now, as the pace of efficiencies in electricity use slows and the AI revolution gathers momentum, [Goldman Sachs Research estimates]( that data center power demand will grow 160% by 2030. In three reports, Goldman Sachs Research lays out the global, US, and European implications of this spike in electricity demand. At present, data centers worldwide consume 1-2% of overall power, but [this ratio will likely rise to 3-4%]( by the end of the decade. Along the way, the carbon dioxide emissions of data centers may more than double from 2022 to 2030. In the US, between 2022 and 2030, the demand for power will rise roughly 2.4%, [Goldman Sachs Research estimates]( — and around 0.9 percent points of that figure will be tied to data centers. That kind of spike in power demand hasn't been seen in the US since the early years of this century. It will be stoked partly by electrification and industrial reshoring, but also by AI. Data centers will use 8% of US power by 2030, compared with 3% in 2022. US utilities will need to invest around $50 billion in new generation capacity just to support data centers alone. Between 2023 and 2033, thanks to the expansion of data centers, Europe's [power demand could grow by 40% and perhaps even 50%]( according to Goldman Sachs Research. Today, around 15% of the world's data centers are located in Europe. By 2030, the power needs of these data centers will match the current total consumption of Portugal, Greece, and the Netherlands combined. Europe has the oldest power grid in the world, so keeping new data centers electrified will require more investment. Our analysts expect nearly €800 billion ($870 billion) in spending on transmission and distribution over the coming decade, as well as nearly €850 billion in investment on solar, onshore wind, and offshore wind energy. --------------------------------------------------------------- May QuickPoll: Investors are focused on the Fed and turning bullish on Chinese equities A solid earnings season, combined with a growing consensus around the Federal Reserve's path, helped buoy investors' bullish views on markets in May, according to the Marquee QuickPoll, which surveyed almost 900 institutional investors on May 6-8. The poll's key findings include: - Watching the Fed More than two-thirds of survey respondents expect the Fed to cut between 25 and 50 basis points this year. “Federal Reserve Chair Jerome Powell's remarks at the latest FOMC meeting — specifically around the high bar for any hikes — likely help build investors' confidence on the path ahead,” says Goldman Sachs' Oscar Ostlund. - Bullish investors Investor sentiment continues to be at a two-year high, with 46% of respondents describing themselves as slightly bullish or bullish, and picking developed market equities as their favorite asset class. - China turning a corner Investors are turning more optimistic on Chinese equites. The S&P 500 aside, respondents expect MSCI China to be the best performing major equity index in May. --------------------------------------------------------------- There are ‘very positive' signals that AI could boost GDP Goldman Sachs Research forecast last year that generative AI could boost GDP and [raise labor productivity growth]( over the coming decade. Since publishing that estimate, investment in generative AI has boomed, but it will take time for the technology to make a dent on the overall economy. “Until we've seen more significant uptake in the actual application of AI, in the regular work production process, I don't think that we're going to see as big of an impact on productivity,” says Joseph Briggs, who co-leads the Global Economics team in Goldman Sachs Research. Briggs wrote last year's AI report with Goldman Sachs economist Devesh Kodnani. “That being said, the early signals of future productivity gains look very, very positive.” Goldman Sachs Research had previously forecast that AI's boost to the economy wouldn't materialize until 2027. The small increase in adoption so far is consistent with that expectation, Briggs says. But some studies and academic work suggest AI adoption can support large increases in productivity, with an average increase of about 25%. “We do still think that it's going to be a pretty significant driver of productivity and GDP growth over a much longer horizon,” he says. Rising investment may help lay the groundwork for AI to be used more widely in the economy. Briggs points out that revenues of semiconductor manufacturers are up about 50% since early 2023. As for the job market, AI has probably boosted labor demand instead of (on net) getting rid of jobs. Job postings mentioning AI have increased, and even sectors that are highly exposed to automation haven't shown a notable uptick in layoffs. Over the long run, Goldman Sachs Research doesn't expect generative AI to cause heavy net job losses. “We generally think that it's going to create opportunities either in AI adjacent sectors or occupations or in sectors where labor has a comparative advantage,” Briggs says. In case you missed it: Read [our previous article]( about how the US labor market is automating and becoming more flexible. --------------------------------------------------------------- US small business owners want election candidates to address inflation More than half of US small business owners are dissatisfied with how the issues they face are being acknowledged by candidates for elected office, according to survey data from [Goldman Sachs 10,000 Small Businesses Voices](. Nearly all of the respondents say they will definitely or probably vote in the November election, but a fifth admit they're unsure about whom to vote for. In comparison, only 12% of the general public declared themselves undecided in recent public polls. The economy and candidates' small business policy will drive their vote in November. Goldman Sachs 10KSB helps entrepreneurs by providing access to education, capital, and support services. The 10KSB Voices survey, which polled 1,259 small business owners in mid-April, was conducted across 47 US states, Puerto Rico, Guam, and Washington, and it reveals an uneven economic recovery. Close to a third of the respondents describe the state of the US economy as “excellent or good,” but 29% describe it as “poor or very poor.” Around 64% of respondents report that their business is operating at or above pre-pandemic levels. When asked which small business issues are being insufficiently addressed this election year, 73% of owners mentioned inflationary pressures, followed closely by small business tax policy (72%) and the burden of regulation (70%). Compared to just three months ago, 71% say inflationary pressures have increased on their businesses and 49% say they've had to raise the prices on their goods or services over that period. Around 81% of small business owners cite the rising cost of labor as the chief inflationary pressure, more than commercial insurance (68%) or the costs of goods and inputs (67%). A majority of small businesses are still hiring both full-time and part-time employees, but 80% of these businesses find it hard to recruit qualified staff. Additionally, three-quarters of the respondents say they're concerned about their ability to access capital, thanks to interest rates remaining high. This feeds into the labor crunch as well. Around 28% of business owners say they will hire more employees if and when interest rates fall. --------------------------------------------------------------- Decarbonization and AI offer new opportunities for impact investors Brian Singer (L) of Goldman Sachs Research and Greg Shell, a partner in sustainable investing in Goldman Sachs Asset & Wealth Management, on Goldman Sachs Exchanges Many investors might consider impact investing to be a relatively niche strategy. But Greg Shell, a partner in sustainable investing within Goldman Sachs Asset & Wealth Management, argues that the megatrends shaping the economy today — artificial intelligence, decarbonization, and the future of work — are creating opportunities for impact investors to make a difference. These trends are affecting large segments of the population, especially low- and middle-skilled workers, he explains on [Goldman Sachs Exchanges](. “What you get are investment opportunities that are likely to be pretty opportune for a decade or more.” Impact investors also don't necessarily have to sacrifice returns, says Brian Singer of Goldman Sachs Research. “There should not be a compromise,” he says. “There are plenty of companies out there that have good return on capital, above average return on capital, that would meet various and advance various sustainable goals or have impact,” he says. “We're talking about themes that we think transcend sustainable investing and, frankly, are part of normal investing or would apply to generalist investing as well: innovation, efficiency, resilience, productivity.” --------------------------------------------------------------- Briefings Brainteaser: Capital flows In the first quarter of 2024, US hedge funds enjoyed their best performance since the winter of 2020 — but they continue to find it challenging to raise funds. Which was the only one of these hedge fund strategies to receive a net inflow of capital in the first quarter? A) General long / short equities B) Sector-focused long / short equities C) Quantitative investing D) Credit [Check the answer here](. --------------------------------------------------------------- Goldman Sachs in the news By clicking on these links, you will redirected to external websites that Goldman Sachs does not own or operate. Goldman Sachs is not responsible for the products, services, or content provided on those sites. Please refer to each external website's terms, privacy and security policies for details. 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