‘AI Data Centers: Reaching a Saturation Point?’

Dell Technologies (DELL) CEO Michael Dell addressed the surging demand for computing power driven by artificial intelligence, suggesting that while current demand is “tremendous,” a saturation point for AI data center construction is inevitable. However, he emphasized, “I’m sure at some point there’ll be too many of these things built, but we don’t see any signs of that,” speaking on “Closing Bell: Overtime.”

Dell’s server and networking business has seen explosive growth, expanding 58% year-over-year and a remarkable 69% in the most recent quarter. This surge is directly linked to the evolution of large language models into more sophisticated multimodal and multi-agent systems, which demand increasingly powerful AI processing capabilities. The company is strategically positioned to capitalize on this trend, offering tailored solutions for AI infrastructure.

Dell’s AI servers integrate Nvidia (NVDA)’s high-performance Blackwell Ultra chips, providing a foundation for robust computing power. These servers find their way into the infrastructure of key players such as cloud service provider CoreWeave and xAI, Elon Musk’s ambitious AI venture. This partnership highlights Dell’s role in enabling the development of cutting-edge AI technologies.

Shares of Dell experienced over a 3% increase Tuesday, fueled by an optimistic outlook presented at an analyst meeting. The company revised its long-term revenue and profit growth expectations upward, signaling confidence in its future performance. Market analysts see this as a reflection of Dell’s successful pivot towards high-growth areas, particularly AI infrastructure.

Specifically, Dell raised its projected annual revenue growth from a previous target of 3% to 4% to a more ambitious range of 7% to 9%. Similarly, diluted earnings per share are now anticipated to increase by 15%, a significant jump from the previous 8% target. This upward revision reflects the company’s strong performance and positive market outlook.

The company’s strong second-quarter earnings, reported in August, further solidified its position. Dell announced plans to ship $20 billion worth of AI servers in fiscal 2026, doubling the previous year’s sales. This ambitious target highlights the company’s commitment to the AI market and its expectations for continued rapid growth.

However, the massive energy consumption associated with AI server deployment remains a key challenge. Michael Dell acknowledged that power availability is a significant constraint for customers, stating, “It’s the clear constraint that we hear about from our customers, including OpenAI. Many customers, in fact, will tell us, ‘Well, don’t deliver it until this day because we won’t have power in the building to support it.'”

OpenAI’s partnership with Nvidia to build data centers with at least 10 gigawatts of power capacity underscores the scale of the energy challenge. This level of energy consumption is equivalent to the annual power usage of approximately 8 million U.S. households, according to analysis.

Major players like Microsoft (MSFT), Google (GOOGL), and Amazon (AMZN) are making substantial investments in AI data centers, further intensifying the demand for energy resources. These investments, while driving innovation, require careful consideration of the environmental impact and the availability of sustainable energy sources.

While Dell emphasized efforts to engineer energy-efficient servers, the sheer scale of these investments will inevitably lead to massive energy consumption. The rapid growth of AI infrastructure necessitates a proactive approach to addressing energy needs and ensuring a sustainable future.

According to data from the Energy Information Administration (EIA), the U.S. power grid is projected to add 63 gigawatts of power capacity in 2025. OpenAI and Nvidia’s 10-gigawatt buildout would therefore account for a significant portion, nearly 16%, of new energy added to the grid. This concentration highlights the urgency to invest in new energy infrastructure and solutions to support AI’s ongoing expansion.

Michael Dell concluded, “At the end of the day, if you’re going to generate tens of trillions of tokens, and you’re going to create intelligence and drive the economy forward, you’re going to need computing power and energy.” This underscores the fundamental relationship between computing power, energy consumption, and economic growth in the age of AI.