AI fuels power demand; China flexes AI muscle

A new report predicts that the global electricity demand for artificial intelligence (AI) will skyrocket in the coming years as adoption and innovation levels reach new peaks.

In the Global Electricity Development and Transition Report 2025, analysts theorize that power demand will stabilize after the initial spike in electricity consumption from AI. The report was issued at the 2025 Global Energy Interconnection Conference in Beijing, which included key industry stakeholders from over 100 countries.

Analysts from the Beijing-based Global Energy Interconnection Development and Cooperation Organization (GEIDCO) issued the report after an in-depth consultation with sector players. A community reading of the report confirmed that AI applications have triggered a surge in electricity consumption in data centers worldwide.

Since 2010, electricity demand has quadrupled, with the report noting a significant surge in power demand levels from 2020. The study noted that electricity consumption from data centers has recorded a compound annual growth rate (CAGR) of 36% since 2010.

Despite the jarring statistics, the report predicted that the trend of AI power consumption will continue in the near term. GEIDCO analysts stated that advanced software algorithms, computing hardware, and data center electricity efficiency are key determinants of AI power consumption.

While demand is not forecasted to reduce, the report theorized that electricity consumption levels will stabilize in the coming years. Mirroring a logarithmic growth pattern, the analysts said that this pattern will slow down, driven by data center efficiency levels.

Efforts are underway to improve AI’s energy demands

Currently, advanced data center energy-management systems can save over 10% of cooling system consumption, and continued innovation across the ecosystem is expected to further reduce energy use in other areas of global data center operations.

The report predicts that AI’s impact on global electricity consumption will be insignificant at optimum operating capacity, noting that international cooperation is key.

Since 2020, AI and blockchain have received their fair share of criticism from environmental conservation groups over their energy demands. Already, one report highlighted that AI chip manufacturing is capable of derailing climate progress in East Asia amid rising power demand.

To reduce AI’s carbon footprint, the United Nations Educational, Scientific and Cultural Organization (UNESCO) advocates reducing prompts from 300 words to 150 words. Furthermore, a UNESCO study revealed that ditching general large language models (LLMs) for lightweight specific models showed significant promise in reducing energy demands.

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China’s AI boom

Industry and Information Technology Vice Minister Xin Guobin disclosed that the surge in China’s local AI and emerging technology ecosystem is not a random event but the concerted efforts of the central government.

The minister said China has launched over 40,000 smart factories and 11 national pilot zones for AI development. Furthermore, the Asian superpower has established 17 national demonstration zones for AI-based vehicle testing and an $8.4 billion national AI investment fund.

Amid the state-of-the-art infrastructure, China has set up a raft of AI rules to guide the operations of AI companies. Given the regulatory clarity, a wave of homegrown firms has set up shop in China, with administrators expressing a desire to become global leaders.

President of the China Association for Science and Technology, Wan Gang, disclosed that the country is learning from first-movers in the industry while eyeing bilateral cooperation. The country has launched the China-BRICS Center for AI Development and Cooperation after inking a streak of international agreements with its trade partners.

“The healthy development of China’s AI industry derives from drawing on the valuable experience of early movers, and making full use of self-advantages like abundant data resources, a complete industrial system, broad application scenarios, and vast market potential,” said Gang.

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Chinese technology firms struggle for supremacy

Given the government’s backing, Chinese AI models have gone on to record sky-high utility in several industries. Meanwhile, China’s DeepSeek has provided stiff competition to United States-based LLMs, costing a fraction of their development costs.

Buoyed by the government’s ultra-modern infrastructure, Chinese AI firms are jostling for the top spot via new product rollouts. Baidu (NASDAQ: BAIDF) has announced upgrades to its search engine, retrofitting AI functionalities to the product to stave off competition from local AI chatbots.

Meanwhile, following the shuttering of its quantum computing unit, Alibaba (NASDAQ: BABA) has updated its Tongyi Qianwen AI model to compete with offerings from Meta (NASDAQ: META) and OpenAI. After its gaming revenues took a hit, Chinese technology firm Tencent (NASDAQ: TCTZF) threw its hat in the ring for a major pivot into the AI race, aiming to catch up with industry first-movers.

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