By Brielle Scott
At NAIOP’s Data Center Summit this week, a high-level group of data center developers, investors, energy/utility leaders and others gathered to discuss the key challenges and opportunities in the data center space.
Jason Schenker, president of Prestige Economics and chair of The Futurist Institute, delivered opening keynote remarks, setting the scene with a stark prediction: A technological iron curtain is falling between the U.S. and its allies and China and its allies, and AI is going to be a critical battleground going forward.
The Technological Iron Curtain
“After the Section 232 and 301 tariffs were implemented in the first Trump administration, when the Biden administration came in, a lot of folks thought those tariffs would go away,” said Schenker. They did not. (Section 232 tariffs target imports that threaten national security; Section 301 tariffs address unfair trade practices by other countries.)
“In fact, there was no daylight, from my perspective, between the first Trump administration and the Biden administration on the topic of China.”
The Biden administration also issued an executive order restricting American companies and individual investments in technologies with national security relevance in countries of concern. The technologies included artificial intelligence, quantum semiconductors and microprocessors, and the countries of concern were China, Hong Kong and Macau.
According to the Pew Research Center, 77% of Americans today view China unfavorably. Compare that to 2005, when only 35% of Americans viewed China unfavorably.
What is Congress doing in this “Cold War II” environment, as Schenker described it? U.S. intelligence agencies have come into both houses of Congress and run tabletop exercises around China taking control of Taiwan in 2027, he said. These intelligence agencies are looking at the risk of full “economic amputation” – the blockade or invasion of Taiwan by China.
He characterized the relationship between the U.S. and China as a “milk carton relationship – it’s gonna spoil.” That expiration date looks like 2027.
“The risk of economic amputation – that we could wake up on any given Tuesday and no longer have access to supply chains of goods from China or Taiwan – is high and rising,” Schenker said.
While the U.S. is strong economically, we’re weak in economic self-sufficiency, material production, weapons of war, dual-use technologies like computers and technology and AI, and rare earth minerals. American companies want to make sure they can source something from China and from somewhere else – the “China Plus One” policy. Schnecker said that when Chinese companies reference “China Plus One,” it means goods bought from China are the same as goods bought from somewhere else… that are also originally from China. In short, they’re all still goods from China.
“The deal signed with Australia a couple weeks ago, what was it about?” Schenker asked rhetorically. “Rare earth minerals. What’s the pressure on Greenland? It’s about rare earth minerals. What was the deal with Ukraine? Rare earth minerals.”
A few weeks ago, during the midst of the longest government shutdown in history, the Senate passed with tremendous bipartisan support a bill restricting biomedical technology investment in China, he added.
De-risk your operations for Cold War II and the falling technological iron curtain, Schenker advised the group. Prepare for additional domestic industrial demand and associated supply chain pressures. “If nothing happens [with Taiwan] in 2027, it means all the economic pressures and the push-and-pull worked to get China to rethink their timeline. But make no mistake, China’s national identity is bound up with gaining control of Taiwan.”
AI as the Battleground
Schenker did some back-of-the-napkin math: Let’s say the average person is 5% more productive when using AI at work. The U.S. has 160-million-person workforce. That’s an extra 8 million full-time workers’ worth of output.
“Now what happens when we get to 20% or 30% [increase in productivity]? Another 50 or 60 million workers’ worth of output. That’s just in this country. We know that the productivity lever is massive. There are no questions as to the immediate value add of adding additional [full-time-employees] at minimal cost,” Schenker said.
McKinsey research shows that by 2030, data centers are projected to require $6.7 trillion in investment worldwide to keep pace with the demand for computing power. Data centers equipped to handle AI processing loads are projected to require $5.2 trillion in capital expenditures, while those powering traditional IT applications are projected to require $1.5 trillion in capital.
“Last week, I sat down with the corporate executive team for one of the biggest power companies in the world, and they asked, ‘Are we in a bubble? Has this all gone too far? How many more data centers are we going to need?’” Schenker shared.
“The question was a lot like asking, ‘When is automotive production going to peak?’”
The answer? Right after the Model T was rolled out.
