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Macquarie to Invest Up to $5 Billion in Applied Digital’s AI Data Centers

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Australia’s Macquarie Group has committed to investing up to $5 billion in Applied Digital’s high-performance computing business, acquiring a 15% stake in the company amid surging demand for artificial intelligence (AI) infrastructure. The announcement, made on Tuesday, sent Applied Digital’s shares soaring by 20% in pre-market trading.

Macquarie’s asset management division has initially pledged $900 million to develop a state-of-the-art data center campus in North Dakota. Additionally, Applied Digital retains the right of first refusal to access an additional $4.1 billion in investments for future data center projects over the next 30 months.

Wes Cummins, CEO of Dallas-based Applied Digital, emphasized that the investment ensures sufficient equity to construct cutting-edge data centers capable of handling the high-power demands of AI applications. The company will use the funds to repay debt incurred during the development of its North Dakota facilities and recover over $300 million of its equity investment in the project.

The move comes amid a broader boom in AI-driven investments, spurred by the rapid growth of generative AI models such as ChatGPT. Computing infrastructure providers like Applied Digital have witnessed substantial interest from businesses seeking to develop their own AI models and gain a competitive edge.

In line with this trend, Microsoft recently announced plans to allocate $80 billion in fiscal 2025 to AI data centers, reflecting the growing computational needs of the industry.

Applied Digital has seen its shares triple over the past two years as investors bet on robust growth in AI and data center infrastructure. The company is scheduled to report its second-quarter earnings later on Tuesday.

 

Biden Signs Executive Order to Support AI Data Centers with Federal Power and Land

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On Tuesday, President Joe Biden signed an executive order designed to bolster the infrastructure needed for advanced artificial intelligence (AI) data centers. The order, according to the White House, aims to address the growing energy demands of AI by leveraging federal land, particularly from the Departments of Defense and Energy, to host gigawatt-scale AI data centers and new clean power facilities.

Biden emphasized that the initiative would accelerate the development of AI infrastructure in the U.S., promoting economic competitiveness, national security, AI safety, and clean energy. “The next generation of AI infrastructure will be built here in America,” Biden stated, underscoring the importance of aligning the country’s energy and technological sectors.

A key provision of the order mandates that companies using federal land for AI data centers must purchase a portion of American-made semiconductors. The exact number of chips required will be determined on a case-by-case basis for each project. This comes as part of the Biden administration’s broader push to invest over $30 billion in subsidizing U.S. chip production.

Tarun Chhabra, White House technology adviser, pointed out that the increasing demand for computational power to train and operate advanced AI models necessitates the creation of robust infrastructure. By 2028, leading AI developers will require data centers with up to five gigawatts of capacity to support the most sophisticated models.

The executive order also addresses national security concerns by ensuring AI technology remains within the U.S. and allied nations, as the Commerce Department moves forward with additional restrictions on AI chip and technology exports. Chhabra noted that AI systems already present substantial risks, including potential military applications and threats related to biological, chemical, radiological, or nuclear weapons.

The order also instructs agencies to expedite electric grid interconnection, permitting processes, and transmission development surrounding the newly designated federal sites.

Geothermal Startups See Growth as AI Demand Rises but Face Rivalry from Natural Gas

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Geothermal energy is gaining traction as a sustainable solution to power the energy-hungry AI data centers of major tech companies like Meta and Google. However, the path forward remains uncertain due to stiff competition from natural gas and the high upfront costs of geothermal projects.

The Rise of Geothermal for AI Energy Needs

Big Tech firms are partnering with geothermal startups to supply clean energy for their data centers. These partnerships are part of a broader push to meet the growing energy demands of AI technologies while accelerating investments in renewable energy.

Trey Lowe, Chief Technology Officer of Devon Energy, a shale gas producer and investor in geothermal startup Fervo Energy, highlights the potential: “We believe geothermal, along with abundant natural gas, can be part of the all-of-the-above energy mix we need to meet the demand.”

Geothermal energy offers advantages such as faster carbon-free electricity generation compared to nuclear energy and reliability over intermittent sources like wind and solar. Despite these benefits, challenges like high drilling costs and lengthy project approvals have tempered initial enthusiasm.

Investments and Industry Shifts

Since 2020, geothermal projects have attracted an estimated $700 million in funding. While startups like Sage Geosystems and Gradient Geothermal are pushing forward with innovative approaches, larger oil majors like Chevron and Exxon Mobil remain focused on natural gas, often coupled with carbon sequestration to lower emissions.

Sage Geosystems, for instance, recently raised $30 million and is planning a Series B funding round in January. Gradient Geothermal is leveraging existing oil and gas infrastructure to generate geothermal energy, a cost-effective strategy gaining interest among mid-sized energy firms.

Geothermal energy’s cost competitiveness is a key factor driving its appeal. The average levelized cost of electricity (LCOE) for geothermal projects in the U.S. stands at $64 per megawatt-hour (MWh), lower than combined-cycle natural gas ($77/MWh) and significantly cheaper than nuclear energy ($182/MWh).

The Texas Geothermal Boom

Texas is emerging as a hub for geothermal development, thanks to its abundant resources, streamlined permitting process, and regulatory certainty. Ten of the 22 geothermal startups launched in the U.S. between 2016 and 2022 are headquartered in Texas.

According to Matt Welch of the Texas Geothermal Energy Alliance, “Texas is becoming the ‘place to be’ for geothermal exploration and development across the board.”

Legislative and Market Support

Lower commodity prices are pushing shale companies to diversify revenue streams, with geothermal becoming a viable option. Bipartisan legislative interest, such as the recently passed CLEAN Act and HEATS Act, could further simplify the process of setting up geothermal projects in the U.S., boosting the sector’s growth.

Trey Lowe of Devon Energy notes that government incentives and the stability of geothermal investments are attracting more private capital: “A combination of a low decline asset with high certainty on pricing piques the interest of many investors.”

Challenges and Outlook

While geothermal energy has significant potential, its growth is clouded by competition from natural gas and the reluctance of major oil companies to commit fully. For geothermal to become a cornerstone of the energy mix, continued investment, innovation, and supportive policy frameworks will be essential.