A ‘Knife Fight’ Is Coming as AI Boom Creates a Natural Gas Crisis

Artificial intelligence has already transformed the markets for semiconductors, networking equipment, and data centers. Now it is reshaping something far less glamorous but arguably even more important: energy. 

The race to build AI infrastructure is turning electricity into a strategic asset, and natural gas sits at the center of that equation. While investors have spent the past two years chasing chipmakers, the next bottleneck may not be compute at all. It may be the fuel needed to power it. That shift could create new winners — and expose risks many investors haven’t yet priced into energy and technology stocks.

AI’s Appetite Is Colliding With Energy Reality

AI data centers need around-the-clock electricity. Unlike solar or wind generation, natural gas plants can deliver constant baseload power, making them the preferred choice for many new AI campuses.

Matthew Smith, chief investment officer of Chronometer Partners, argued on the Invest Like the Best podcast that the U.S. is heading toward a structural natural gas shortage beginning in 2028. His firm’s 18-month research effort concluded that the country could face a supply deficit even before AI demand reaches full scale.

Here’s what the numbers tell us:

Those figures reveal the problem. Production is expected to rise about 20 Bcf per day, but LNG export commitments alone consume much of that increase before accounting for new AI data centers. According to Smith, the market could create a “knife fight” for available natural gas supplies.

The Investment Opportunity Is Broader Than Energy

If natural gas prices rise because supply struggles to keep pace with demand, the effects ripple across multiple industries.

Natural gas producers could benefit from stronger pricing, while utilities owning gas-fired generation may see fuel costs climb. AI hyperscalers could also face a meaningful increase in operating expenses. Smith estimates energy currently represents roughly 10% of AI compute costs but could rise to 20% or even 30% if gas prices were to double or triple over time.

Conversely, alternative power sources become more attractive as electricity prices increase.

Companies tied to nuclear generation could see greater demand as policymakers look for dependable, carbon-free baseload power. Solar assets also become more valuable when wholesale electricity prices rise because they can capture higher market prices without fuel costs. Meanwhile, equipment suppliers benefiting from today’s AI infrastructure boom could eventually see orders moderate if rising energy costs slow new data center construction.

Granted, this isn’t a near-term certainty. New production, pipeline expansions, or faster permitting could ease some pressure. Even so, LNG export projects already under construction are backed by multibillion-dollar contracts that are unlikely to disappear, limiting the flexibility of domestic supply.

Key Takeaway

In short, AI’s biggest constraint may soon shift from chips to energy. Investors have largely focused on Nvidia (NASDAQ:NVDA | NVDA Price Prediction), Advanced Micro Devices (NASDAQ:AMD), and the hyperscalers, but the companies supplying the fuel that powers AI deserve equal attention.

Regardless of whether natural gas prices spike exactly as projected, one conclusion appears difficult to escape: AI is becoming an energy story as much as a technology story. Smart investors should broaden their watch lists beyond semiconductors and consider how natural gas producers, nuclear power companies, and electricity infrastructure providers fit into the next phase of the AI investment cycle. 

If the coming battle for energy turns into the “knife fight” some industry experts expect, those sectors may prove just as essential as the processors inside the data centers.

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