BEFORE I begin, a bit of a programming note. As my columns are necessarily written and submitted a day ahead, this particular installment is being composed on early Monday morning, prior to President Marcos’ State of the Nation Address (SONA), which should rightfully be the big news for this week, or at least the next couple of days. Thus, what Marcos says later today (Monday) may indeed be quite significant, perhaps enough so that this column will seem oddly out of touch with current events.
On the other hand, perhaps not. I would bet that the president will at least mention the “Pax Silica” initiative, as the government is trying to sell it as the answer to all the Philippines’ economic prayers and the dawn of a new golden age. It is not, and will not be either of those things, but if we are to convince the government to do what it ought it to do with — which is to drop this so-called agreement and run away — the government’s fact-free triumphalist propaganda needs to be countered with substantial, real-world information.
Given that the main priority of the Pax Silica initiative is for US-based tech firms to find new places to build the massive data centers required for the artificial intelligence (AI) business, I did some research over the past few days to try to discover why the US government is pushing so hard for this.
If anyone is still belabored by the mistaken belief that Pax Silica is about anything but AI data centers, consider recent news from Australia, which was one of the early adopters in signing on to the US initiative. Prime Minister Anthony Albanese announced last week that Australia would go “all in” on data center development, describing goals that far exceed what Australia’s own tech sector would need. Of course, he made the obligatory comments that the country’s water, power and environmental concerns would be looked after in the process, but no one really took him seriously. Every Australian I know who doesn’t actually work for their government considers Albanese a wanker and a toady of Big Business, and points out that if he were to respect water, power and environmental concerns in data center development, it would be an unexpected first for his government.
So, the question that I had to research was this: All of the AI giants — OpenAI, Anthropic, Microsoft, Alphabet, Meta, whatever it is that malignant yarpie Elon Musk calls his AI enterprise, and others — are based in the US. The US has abundant power and water resources, although these are not evenly distributed across the country. The US also has the world’s best digital communications infrastructure. So why do these companies need to look to other countries like the Philippines, or Australia, or anywhere else that is not as well-endowed as the US to find sites for new data centers?
There are several reasons. First, AI scales poorly; as AI engines grow in sophistication, capabilities and usage, they require greater amounts of physical infrastructure, much more on a proportional basis than any other technological leap in human history. Even though the US started out with a comfortable surplus of physical space, water and power, the rapid growth of AI has quickly outgrown that, and growth projections are such that within a year or two, the infrastructure availability will make it impossible for that growth to continue.
On July 21, BloombergNEF published a revised estimate for data center electricity demand to 194 gigawatts (GW) by 2035, a shocking 83-percent increase from its estimate shortly after the beginning of this year. Currently, data centers use about 5.9 percent of the US electricity supply; under the new estimate, that would increase to about 20 percent. To put that in perspective, the entire US industrial sector, according to data from the US Energy Information Agency, used 25.7 percent of US generating capacity in 2025.
To be fair, those growth forecasts are a bit suspect, because AI companies and data center operators have yet to demonstrate that they have profit-generating business models. A recent AdWeek report, for example, showed that OpenAI is on track to miss its advertising revenue target this year by about 90 percent. The AI companies need hundreds of billions in revenue to keep operating and developing their products, and to either develop and operate their own data centers, or pay for data center services from third-party operators, and it is still not clear where that money will come from.
Nevertheless, the AI companies are locked into a pattern where they have to continue to try to grow in the hope that growth will lead to a tipping point where profits are assured, and so here is where they have a hit a wall of physical, on-the-ground reality. Even in the US, electricity generation capacity cannot be added fast enough to keep pace with AI’s rapidly increasing power demands, and a perhaps bigger problem is the fact that developing the transmission grid to carry power to all the needed new data centers takes even longer to develop.
A second, and highly visible problem, is that there is increasing pushback against data centers, and the new power plants and transmission infrastructure to serve them, from communities in the US. The public is increasingly wary of gigantic, noisy developments that consume massive amounts of power and water and require only a few people — so providing very few local jobs to speak of — to operate. Although local rejection of data centers has not been as widespread as new stories have suggested — for this year, only about 20 have been stopped by community dissent across the US, but about twice that number are going ahead — government officials in elected positions have been put on notice that their support for data centers might be politically fatal. The 2026 midterm elections are coming up in November (there are a lot of local government positions up for grabs), and there is growing concern that data centers might be a pass-fail issue. Recent by-elections for state and local seats in Wisconsin already resulted in a large number of “pro-data center” officials getting ejected from office, which almost everyone regards as a sign of things to come in just a few months.
ben.kritz@manilatimes.net
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