Artificial intelligence is often viewed as a driver of higher electricity use and, by extension, faster decarbonization. However, one of its most immediate effects may be the opposite of what many assume. The rapid expansion of AI infrastructure is increasing demand for reliable power, and this reality could reinforce the role of natural gas and other dispatchable energy sources for many years.

Investors focused on semiconductor and software valuations may be overlooking a fundamental constraint. AI runs on electricity, and power systems operate within physical and economic limits.

AI Is Driving a New Wave of Power Demand

The energy sector spent most of the past decade dealing with slow growth in electricity loads. That is now changing, in a way reminiscent of the sharp rise in oil demand — and then prices — in the early 2000s.

Training large language models and running advanced AI systems require massive computing resources. Hyperscale data centers are expanding rapidly, with developers requesting gigawatt-scale grid connections from utilities. In several regions, electricity demand forecasts have been revised upward after years of flat expectations.

The significance of this shift is that AI workloads generate continuous, high-density demand rather than intermittent usage. Data centers cannot simply shut down when power supply becomes constrained. Reliability becomes critical.

Reliability Needs Are Changing the Generation Mix

Wind and solar capacity continues to expand, but intermittent generation alone cannot meet the firm capacity needs of AI infrastructure without large-scale storage or backup generation.

Battery storage is improving, but long-duration storage remains expensive at scale. Nuclear projects face long development timelines and regulatory complexity. Transmission expansion is also lagging demand growth in many regions.

These constraints make dispatchable energy sources essential. Natural gas plants can ramp output quickly, run continuously, and be deployed faster than many alternatives. As a result, gas-fired generation is increasingly viewed as a practical solution for supporting AI-driven load growth.

This does not eliminate the role of renewables. In many markets, new renewable capacity is paired with gas generation to maintain grid stability. The key point is that AI-driven electrification of demand is likely to increase fossil fuel use in the near term.

Natural Gas May Be One of the Biggest AI Winners

Several factors support natural gas as a near-term beneficiary.

Construction timelines favor gas plants when demand rises quickly. Existing pipeline infrastructure lowers expansion barriers. For data center operators, reliability usually outweighs ideological preferences, since outages are extremely costly.

Utilities are also revising resource plans as load forecasts rise. This shift could drive higher investment in transmission networks, grid upgrades, and flexible generation assets.

The Decarbonization Story Is More Complex

A common narrative holds that AI accelerates the shift away from fossil fuels because it increases electrification. The reality is more nuanced.

If electricity demand grows faster than low-carbon capacity, fossil generation may rise in absolute terms even if renewables gain market share. Total emissions could increase while carbon intensity declines as cleaner sources take a larger share of supply.

Energy systems ultimately evolve based on engineering and economics, not only policy goals or market narratives.

What Investors May Be Missing

AI is often discussed as a technology story, but it is also an infrastructure story.

Rising power demand could benefit utilities investing in transmission and generation capacity. Natural gas producers and midstream infrastructure companies may see structural demand support from higher power-sector consumption. Suppliers tied to grid reliability equipment and gas turbines may also benefit.

Over the longer term, advances in nuclear, storage, or efficiency could change the trajectory. For now, the immediate response to a sharp rise in electricity demand is likely to rely on technologies that can be deployed quickly and reliably.

AI may reshape the economy in profound ways. One of its most underappreciated effects is that it could extend the importance of natural gas while the world builds the energy backbone needed for the next generation of computing.

Nickel prices rose during Friday trading, extending gains for a fifth consecutive session, after the world’s largest nickel mine in Indonesia received a much smaller production quota for this year, heightening supply concerns.

The benchmark three-month nickel contract on the London Metal Exchange touched $17,980 on Wednesday, its highest level since January 30.

French mining company Eramet said its PT Weda Bay Nickel project — a joint venture with China’s Tsingshan and Indonesia’s PT Antam — received an initial production quota of 12 million wet metric tons for 2026, down from 32 million wet metric tons in 2025, adding that it will apply for a quota increase review.

After a prolonged period of low prices, nickel has jumped about 18.6% over the past three months and reached its highest level in more than three years on January 25, after Indonesia — the world’s largest nickel ore producer — pledged to curb supply.

Nitesh Shah, commodities strategist at WisdomTree, said Indonesia “clearly recognizes its pricing power,” noting that its control of around 60% of global output makes it “more influential than OPEC in the oil market.” He added that Jakarta has realized it does not need to overproduce to secure strong revenues.

Despite that, the International Nickel Study Group expects a surplus of 261,000 tons this year, while an LME futures positioning report showed that a single participant holds a short position in the February contract representing between 20% and 29% of total open interest.

Other base metals were also supported by a weaker US dollar, which made dollar-denominated commodities more attractive to holders of other currencies.

In trading, spot nickel contracts were down 3.3% at $16.8 thousand per ton as of 16:26 GMT.

Bitcoin traded near the $67,000 level on Friday, extending its recent sluggish tone and heading toward a fourth consecutive weekly decline, as investors adopted a cautious stance amid broad weakness in high-risk assets.

The world’s largest cryptocurrency was down about 1% at $66,988.0 as of 09:37 ET (14:37 GMT), after falling to lows near $65,000 in the previous session.

Bitcoin is now on track for a weekly loss of roughly 5% — its fourth straight weekly drop. The token struggled to build sustained upward momentum this week after rebounding from earlier lows, before slipping again toward the support level recorded last week near $60,000.

Bitcoin under pressure amid global tech stock selloff; US inflation slows in January

Risk aversion spread across financial markets, with technology stocks on Wall Street declining overnight and Asian equities weakening on Friday, as a broader selloff weighed on investor sentiment.

Fears tied to AI-driven disruption resurfaced on Thursday, with heavy selling in software and information technology shares, as investors questioned how far automation and new AI tools could undermine traditional business models and revenue sources.

Meanwhile, the latest US Consumer Price Index report released Friday showed inflation pressures eased more than expected in January, offering early signs that the US price environment may be stabilizing.

Headline CPI rose 2.4% year over year, down 0.3 percentage points from December, according to data from the Bureau of Labor Statistics released Friday. That level brings inflation back to ranges seen shortly after President Donald Trump announced broad tariffs on US imports in April 2025.

Core prices — which exclude food and energy — increased 2.5% year over year, matching economists’ expectations of 2.5% for both readings.

On a monthly basis, headline prices rose 0.2% on a seasonally adjusted basis, while core prices increased 0.3%. Economists had expected a 0.3% rise for both measures.

The softer-than-expected inflation reading helped lift market expectations for Federal Reserve policy easing. Futures traders raised the probability of a June rate cut to about 83%, according to the CME FedWatch tool.

Earlier this week, strong US jobs data showed solid nonfarm payroll growth and a drop in the unemployment rate, reducing hopes for a near-term rate cut.

That report also capped market optimism and contributed to muted trading in Bitcoin and other speculative assets.

Crypto industry leaders join CFTC innovation advisory committee

The US Commodity Futures Trading Commission appointed several top crypto industry executives to its new innovation advisory committee, underscoring the agency’s growing role in overseeing digital asset markets.

The committee includes:

Coinbase CEO Brian Armstrong

Ripple CEO Brad Garlinghouse

Robinhood CEO Vladimir Tenev

Uniswap Labs CEO Hayden Adams

The committee will advise on emerging technologies such as blockchain and artificial intelligence and their intersections with derivatives and crypto markets.

The move comes as US authorities work to clarify regulatory frameworks for digital assets, with broad expectations that the CFTC will play a central role in shaping future crypto market rules.

Cryptocurrency prices today: Altcoins show weak performance

Most altcoins also traded slightly lower on Friday.

Ethereum, the world’s second-largest cryptocurrency, fell less than 1% to $1,973.31.

XRP, the third-largest cryptocurrency, declined 0.8% to $1.38.

Gold prices rose in European trading on Friday to resume gains that were temporarily paused yesterday, moving back close to trading above $5,000 per ounce, while the advance is being capped by the stronger US dollar against a basket of global currencies.

Strong US labor market data reduced the likelihood that the Federal Reserve will cut US interest rates next March. To reprice those expectations, investors are awaiting the release of key US inflation data later today.

Price overview

Gold prices today: gold rose by 1.55% to $4,997.43, from the opening level at $4,921.70, and recorded a low of $4,886.63.

At Thursday’s settlement, gold prices fell by 3.2% due to correction and profit-taking activity, after recording a two-week high the previous day at $5,119.21 per ounce.

US dollar

The dollar index rose on Friday by 0.1%, maintaining gains for the fourth consecutive session, within a recovery from two-week lows, reflecting stronger US currency levels against a basket of global currencies.

This rise followed the release of strong US labor market data, which reduced the chances of a near-term Federal Reserve interest rate cut.

US interest rate

The US economy added more jobs than expected last December, with the unemployment rate declining and average hourly earnings rising.

Following those figures, and according to the CME FedWatch tool, market pricing for keeping US interest rates unchanged at the March meeting rose from 79% to 95%, while pricing for a 25 basis point rate cut fell from 21% to 5%.

US inflation data

To reprice the above expectations, traders are awaiting later today the release of key US inflation data for January, which is expected to influence the Federal Reserve’s monetary policy path this year.

Gold outlook

Kyle Rodda, analyst at Capital.com, said the gold market will remain in an upward trend over time, but with the current sharp volatility and these elevated levels signaling market direction, large moves are clearly accelerating price action.

Rodda added that precious metal prices declined alongside equities overnight, with no major economic catalyst supporting them, noting that the heavy selling seen overnight was clearly driven by renewed concerns about the impact of artificial intelligence.

SPDR

Holdings of SPDR Gold Trust, the world’s largest gold-backed ETF, fell on Thursday by about 5.14 metric tons, bringing the total down to 1,076.18 metric tons, the lowest level since January 15.