China’s potential secret weapon in the global race to lead artificial intelligence innovation may lie in its vast electricity resources. While China has been quietly accelerating the development and integration of large language models, Western countries are facing growing trade-offs related to energy security in order to keep data centers running.

Rising power demand and the grid capacity required to support the expanding computational loads of AI are placing immense strain on electricity networks across the West. These grids were already fragile in the United States and Europe, as electrification accelerated and solar and wind capacity was added at a pace that outstripped investment in supporting infrastructure. As a result, large-scale power outages have become more frequent, alongside painful increases in energy prices.

Jeremy Forre, senior vice president of strategic sourcing at Straighten Energy, wrote in a recent opinion piece for Utility Dive: “As power demand rises and grid modernization accelerates, utilities and developers are facing a double pressure of global trade uncertainty and grid reliability.”

Paradoxically, however, China — the world’s largest installer of renewable energy and effectively the first true “electric nation” — does not suffer from the same problems, or at least not to the same existential degree.

One key difference is that China has invested heavily in expanding and upgrading its power grids, successfully aligning grid capacity with demand far more effectively than its Western counterparts. While China experienced a series of regional power outages earlier in the decade, it has not faced any major or dangerous nationwide outages since.

This places China in an exceptionally strong economic and geopolitical position. Relative abundance, stability, and lower electricity costs could give the country a significant edge in the global AI arms race. Alberto Vettoretti, managing partner at consultancy Dezan Shira & Associates, told the South China Morning Post recently: “In terms of power capacity, the gaps between China and the United States and the European Union are large, and China is clearly moving ahead in scale, structure, and growth momentum.”

Moreover, China has begun offering energy price subsidies for data centers after Chinese technology firms complained about power costs “driven by the use of domestically produced semiconductors, which are less efficient than Nvidia chips,” according to a recent Guardian report. These subsidies are part of a broader package of incentives aimed at supporting AI companies in China. Time magazine reported this week: “As AI dominance becomes a central government policy objective, every city and region is offering incentives to startups in the sector.”

Although China still lags behind the United States in the development and design of AI technologies, Chinese tech firms are positioned to catch up with, and potentially surpass, Silicon Valley in the not-too-distant future. The government’s “AI Plus” initiative, announced last August, sets out an ambition to “reshape production models and human life,” integrating AI into 90% of China’s economy by 2030.

For the world’s second-largest economy, this will require enormous amounts of electricity and vast grid capacity. Yet Beijing can also harness AI itself to improve grid efficiency. Artificial intelligence can play a central role in managing a power network that increasingly relies on volatile energy sources while simultaneously facing rising round-the-clock demand. Large language models can use supply-and-demand data to calculate fine-grained fluctuations in real time, at lower cost than many traditional computational models.

Fang Luorui of Xi’an Jiaotong-Liverpool University told Reuters earlier this month: “If AI models are well trained to accurately predict how much renewable electricity will be generated throughout the day and how much power will be needed at corresponding times, grid operators can decide how to balance supply and demand in advance, more efficiently and safely.”

China plans to comprehensively integrate artificial intelligence into its power grid by next year.

US stock indices fell during Thursday’s trading session, weighed down by renewed pressure on the technology sector as investors assessed the latest corporate earnings results.

Shares of software companies slid into bear market territory, amid growing concerns that the rapid pace of development in artificial intelligence technologies could undermine the business models of many firms operating in the sector.

Markets also digested the Federal Reserve’s decision on Wednesday to keep interest rates unchanged, alongside signals that economic activity continues to grow at a solid pace, with early signs of stabilization emerging in the labor market. These factors reinforced expectations that the US central bank may pause its rate-cutting cycle for a period.

In trading, the Dow Jones Industrial Average fell by 0.1%, or 67 points, to 48,948 by 17:11 GMT. The broader S&P 500 declined by 0.8%, or 57 points, to 6,921, while the Nasdaq Composite dropped sharply by 1.7%, or 415 points, to 23,445.

Copper prices hit a new record above $14,000 per metric ton during Thursday’s trading, driven by heavy speculative buying amid expectations of stronger demand, alongside a weaker US dollar and rising geopolitical concerns.

Investors largely brushed aside warnings from some analysts that the sharp price surge could curb real demand from industrial consumers, and that the rally is not fully supported by current supply-and-demand fundamentals.

The benchmark three-month copper contract on the London Metal Exchange jumped 9% to a record high of $14,268 per ton, before paring gains to $14,147 by 13:15 GMT. In official open-outcry trading on the exchange, copper rose 6.6% to $13,950 per ton.

Neil Welsh of Britannia Global Markets said in a research note: “Copper recorded its biggest daily gain in years, driven by intense speculative activity from bullish investors in China.” He added that “investors are flowing into base metals on expectations of stronger economic growth in the United States, and increased global spending on data centers, robotics, and energy infrastructure.”

Copper, which is widely used in the energy and construction sectors, is a key metal in the energy transition. However, exchange-monitored global inventories remain elevated, particularly in the United States, raising questions over the sustainability of the current price rally.

In China, the most actively traded copper contract on the Shanghai Futures Exchange closed the daytime session up 6.7% at 109,110 yuan per ton (about $15,708.77), after hitting a record intraday high of 110,970 yuan.

These gains came despite weak spot demand in China, the world’s largest copper consumer. The Yangshan copper premium, a key indicator of Chinese demand for imported copper, fell to $20 per ton on Wednesday, its lowest level since July 2024, down from $55 in December.

Traders said copper prices have also been lifted by a broader shift in investor appetite toward tangible assets, which has pushed gold and silver to record highs amid escalating geopolitical tensions.

A weaker US dollar, hovering near multi-year lows, has further supported metal prices by making dollar-denominated commodities cheaper for buyers using other currencies.

Elsewhere on the London market, aluminum rose 2.1% to $3,325.50 per ton, its highest level since April 2022, while zinc climbed 4.4% to $3,513, the highest since August 2022. Lead gained 1.6% to $2,049, nickel jumped 3.6% to $18,025, and tin rose 1.5% to $56,795 per ton.

Bitcoin slid toward the $88,000 level on Thursday, remaining under pressure despite a weaker US dollar and a strong rally in gold prices, as investors digested the Federal Reserve’s decision to keep interest rates unchanged.

The world’s largest cryptocurrency fell by about 1% to trade at $88,201.6 by 01:56 a.m. US Eastern Time (06:56 GMT).

Bitcoin has remained range-bound this week, trading between $86,000 and $89,000, posting only modest gains of less than 1% since the start of January.

Bitcoin underperforms despite gold rally and weaker dollar

The subdued performance in cryptocurrencies stood in sharp contrast to the strong rally in the gold market, where prices surged above $5,500 per ounce for the first time on Thursday, supported by robust safe-haven demand, escalating geopolitical tensions, and expectations surrounding Federal Reserve policy.

Although Bitcoin is often described as “digital gold,” it continued to move within a narrow range and failed to benefit from the broader flight to safe-haven assets.

On Wednesday, the Federal Reserve kept its benchmark interest rate unchanged in a range of 3.50% to 3.75%, stepping back after three consecutive rate cuts.

Fed Chair Jerome Powell said policymakers need more evidence that inflation is moving sustainably toward the 2% target before considering further easing, citing continued strength in the labor market and stable economic growth.

Powell’s comments struck a cautious tone, reinforcing expectations that any future rate cuts will be gradual and data-dependent. This weighed on risk-sensitive assets, including cryptocurrencies, as investors reassessed liquidity prospects over the coming months.

White House moves to break regulatory deadlock

In a separate development, Reuters reported that the White House plans to hold a meeting next week with senior executives from the banking and cryptocurrency sectors, in an effort to break a deadlock over key US legislation regulating digital assets.

According to the report, the meeting will be organized by the administration’s crypto council and will focus on contentious provisions related to whether crypto firms should be allowed to offer yields or rewards on dollar-pegged stablecoins.

The move reflects President Donald Trump’s push to advance digital asset legislation after months of disagreement between banks and crypto companies over competitive risks.

The summit could help pave the way toward a compromise on the so-called “Clarity Act,” which aims to establish a comprehensive federal regulatory framework for digital assets.

Crypto advocates argue that offering yields is essential to attract users, while banks warn it could accelerate deposit outflows and threaten financial stability. These concerns have stalled progress on the bill in the US Senate, according to Reuters.

Altcoins continue to retreat

Elsewhere in the crypto market, most major altcoins continued to decline on Thursday amid a broadly risk-averse environment.

Ethereum, the world’s second-largest cryptocurrency, fell about 1.5% to $2,958.92, while XRP, the third-largest digital asset, also slipped 1.5% to trade at $1.88.