Microsoft CEO Satya Nadella has shifted the focus in the AI infrastructure debate, asserting that the limiting factor in the race for advanced AI is no longer the supply of AI semiconductors, but the availability of electrical power. Speaking on the BG2 podcast, hosted by Altimeter CEO Brad Gerstner, Nadella engaged in a rare joint dialogue with OpenAI CEO Sam Altman about the challenges and future of the AI industry.

Nadella says the ‘new’ bottleneck is electricity

Nadella stated that the industry has moved past the initial supply constraints of specialised hardware and is now facing a more fundamental challenge.

“The biggest issue we’re having now isn’t chips — it’s POWER,” said Satya Nadella. “If you can’t build close to power, you’ll have a bunch of chips sitting in inventory you can’t even plug in. It’s not a chip supply problem anymore — it’s a power problem,” he said during the podcast.OpenAI’s Sam Altman, meanwhile, predicted that the current scarcity of computing power is temporary, stating that “excess computing power will definitely emerge”, noting that this oversupply could happen within the next two to six years.

Microsoft’s dual ‘factory’ strategy

Nadella detailed Microsoft’s strategic approach to AI development, emphasising that the key metric is not reducing the cost of computing power, but improving the efficiency of “intelligence per unit.”To achieve this, Microsoft is focused on building two “factories” simultaneously:The ‘Token Factory’ which refers to the underlying computing infrastructure such as hardware, system software, virtualization management and scheduling capabilities. The second is ‘Agent Factory’ which pertains to the upper-level software ecosystem.Altman also underscored the importance of AI’s potential for scientific discovery, calling it the ultimate goal. “If we can truly enable AI to conduct scientific research, then in a sense, that would be superintelligence,” he stated.Altman also offered high praise for his partner, attributing OpenAI’s success to the software giant’s early backing: “Without Microsoft, especially Satya Nadella’s early and steadfast belief, we wouldn’t be where we are today. I think there were very few people willing to take such a bet back then.”