Growth in the AI data center sector could slow due to a global trade war and heightened macroeconomic uncertainties, according to the International Energy Agency (IEA). In a Thursday report on AI and its expected impact on global electricity demand, the agency modeled a so-called Headwinds Case, which forecasts slower AI adoption in case bottlenecks, including macroeconomic headwinds, emerge and persist. The Headwinds Case captures the impact of a downside in the outlook for data center deployment, particularly due to slower than expected AI adoption. The emergence of local bottlenecks and a tight supply chain would cause delays in capacity expansion compared to the most ambitious industry projections, the IEA said. The report highlighted that significant uncertainties remain about predicting how fast AI will develop, including the macroeconomic outlook. Laura Cozzi, the IEA’s Director of Technology, told Reuters on Thursday that headwinds, including an escalating tariff war, could challenge these projections and slow AI deployment and advances. The U.S. trade policy could defer some spending on data center construction as Big Tech would be looking to procure semiconductors while they are still tariff-free, according to analysts. Capital expenditure by tech giants will get reshuffled: Expect major players in AI infrastructure and consumer tech to reallocate short-term spending away from expansion and toward procurement hedging or sourcing shifts, Abhishek Singh, partner at research firm Everest Group, told Reuters last week.

Trade War Could Slow Down the AI Boom

The International Energy Agency (IEA) outlined a 'Headwinds Case' in a recent report, predicting slower AI adoption due to global trade wars and macroeconomic uncertainties. The report forecasts delays in data center capacity expansion, highlighting the impact of local bottlenecks and supply chain issues on AI deployment. Analysts suggest that major tech companies might reallocate spending from expansion to procurement hedging or sourcing shifts in response to U.S. trade policies.