AI and data center power demands spark a gas renaissance in North America

The rapid development of artificial intelligence and the swift expansion in both the number and capacity of data centers are driving a surge in electricity demand, triggering a “renaissance” in the North American natural gas market.

According to data reported by Bloomberg, the escalating demand for electrical power is pushing interest in natural gas back to peak levels.

Brandon Freiman, a partner at the leading alternative asset management firm KKR & Co., stated that the energy sector has transitioned into a new growth cycle after years of stagnant demand.

Freiman emphasized that artificial intelligence has emerged as one of the most prominent factors driving this growth.

Speaking at the Sohn Montreal Investment Conference, Freiman pointed out that investing in the energy sector has become “one of the most tangible ways to bet on AI.”

Freiman noted that investors no longer need to choose between model developers or chip manufacturers, as there is a direct and fundamental need for the energy capacity required to run computing centers.

He reported that the construction costs for new gas-fired power plants have tripled, rising from $1,000 to $3,000 per kilowatt. This capital spike has made speculative construction impossible, Freiman added, shifting projects toward a foundation of long-term planning.

Robert Horn, Global Head of Infrastructure at Blackstone Credit and Insurance, stated that the vast majority of new gas power plant projects are backed by long-term contracts with utility companies, industrial consumers, and technology giants such as Amazon.com Inc., Microsoft Corp., and Google parent Alphabet Inc.

Horn noted that this arrangement provides “predictable revenue” before construction even begins.

The report noted that due to high capital intensity, market focus has shifted from public to private markets. Large infrastructure investors are expected to finance projects secured by guaranteed demand.

Bloomberg had previously reported on June 1 that the global liquefied natural gas (LNG) market could soon face oversupply and low prices.

The completion of a “third wave” of production capacity expansions between 2026 and 2030 was cited as a major factor in this projected trend.

The agency also reported that while the threat of closure at the Strait of Hormuz temporarily supported the market, the market would adjust if peace talks between Washington and Tehran after July proved successful, triggering a long-term decline in LNG prices.

On February 28, following the start of a military operation by the US and Israel against Iran, Tehran blocked the Strait of Hormuz, a critical maritime chokepoint through which approximately 20% of global oil supply and nearly 30% of liquefied natural gas pass.

In reaction to the failure of negotiations in Islamabad, US President Donald Trump announced a blockade of Iranian ports on April 13 to halt Iranian oil exports. In late May, Trump announced the lifting of the blockade within the framework of a peace agreement being drafted with Tehran.