Europe’s fatal weakness in the global AI race—energy!

Goldman Sachs has issued a new warning: although Europe's energy crisis is expected to end by 2027, Europe still faces severe energy security vulnerabilities in the AI era, which could become its fatal weakness in the global AI race.

On November 10, according to news from Chasewind Trading Desk, Goldman Sachs stated in its latest deep research report that three deeply entrenched vulnerabilities in Europe’s energy system—dependence on fossil fuels, bottlenecks in low-carbon supply chains, and aging power grids—are together forming Europe’s "fatal weakness" in the global artificial intelligence (AI) competition, severely limiting its data center expansion and overall economic competitiveness.

The report points out that Europe's dependence on fossil fuels is merely being reshuffled rather than reduced—shifting from Russia to the United States and Qatar. Meanwhile, Europe’s supply chains for renewable energy, AI, and defense rely heavily on imported rare earths and magnets; nuclear power also depends completely on imported uranium. Additionally, Europe’s power grid is aging, fragmented, and highly susceptible to cyberattacks, restricting its capacity to meet new AI demands.

The bank warns that AI-driven growth in electricity demand is strengthening the link between energy resilience and economic competitiveness. Cheaper and safer energy supplies may be necessary, but may not be sufficient to restore the competitiveness of energy-intensive industries, nor to significantly increase Europe’s meager share of only 10% in the global data center market (far below the US’s 44%).

Dependence on Fossil Fuels: Reshuffling, Not Reduction

The report states that the bank first delivers a seemingly optimistic signal: thanks to a significant increase in global LNG supply, Europe’s energy crisis is expected to end by 2027. Goldman Sachs predicts that by the second half of 2027, Europe’s TTF natural gas prices will fall by nearly 50% to €17/MWh, back to pre-crisis levels.

However, this is not reason for complacency. Goldman Sachs states that the reality is that Europe’s pattern of energy dependence is being “reshuffled, not reduced.” Europe will continue to import nearly half of its energy, in sharp contrast to the US, which has become a net exporter of energy.

In the past, the reliance was on Russia; in the future, it will shift to the US and Qatar. The report predicts that by 2030, these two countries will together account for 55% of global LNG exports. This new supply concentration brings its own geopolitical risks.

The report notes that recently Qatar warned it might halt LNG shipments to Europe if EU corporate sustainability rules are not amended. This means Europe’s economy remains exposed to the geopolitical game over energy supply.

Low-Carbon Energy’s Dependence on Externally Concentrated Supply Chains

In the transition to green energy and the AI era, Europe’s low-carbon supply chains reveal even more severe external dependence and concentration risks. Goldman Sachs's report emphasizes:

First is the absolute reliance on rare earths and magnets. These materials are vital for wind turbines, electric vehicles, semiconductors, AI systems, and even defense equipment.

Data shows that Europe’s market share of rare earths is almost negligible (about 2%). Rebuilding Europe’s domestic supply chain is extremely difficult; developing a mine takes 8–10 years, and building a refinery about 5 years.

Second is the “pain of being uranium-free” in nuclear energy. Nuclear energy accounts for 11% of the EU’s primary energy consumption (as high as 46% in France), but Europe produces no uranium domestically and relies entirely on imports.

Goldman Sachs notes that its supply chain is also highly concentrated: about three-quarters of the natural uranium used by the EU comes from Canada, Kazakhstan, and Russia.

For subsequent refinement, 24% of enriched uranium for European nuclear plants still needs to be imported from Russia. This 100% import dependence puts Europe’s nuclear lifeblood firmly in the hands of a few countries.

Vulnerable Power Grid Infrastructure

Goldman Sachs says that energy security is not just about the source, but also about reliable distribution—and this is precisely Europe’s third major weakness.

The report notes that Europe’s power grids are generally aged, with an average “age” as high as 50 years, approaching the end of their design life. Fragmentation of the grid leads to huge and widening regional price differences, while the system is highly vulnerable to outages (such as Spain's recent blackout) and cyberattacks.

The rise of AI creates massive new pressure on an already strained grid. As the backbone of AI infrastructure, data centers require enormous and consistently stable power supplies, and their tolerance for outages is essentially zero.

Goldman Sachs’s report cites surveys showing that over 90% of data center operators rank the availability of electricity as their top concern, and nearly half believe grid upgrades are the most important remedy.

Goldman Sachs believes it is clear that Europe’s fragile power infrastructure is becoming a physical bottleneck to embracing the AI revolution.

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The above wonderful content is from Chasewind Trading Desk.

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