For years, hyperscalers like Amazon, Google, Meta, and Microsoft have aggressively acquired wind and solar developments to power their operations. Now, however, these tech giants are pivoting toward natural gas to fuel the data centers underpinning their ambitious AI initiatives. Yet, a new research report suggests this newfound reliance on fossil fuels could lead to significant regrets.
According to Noreva, an energy research firm, natural gas prices in certain U.S. regions could triple over the next few years. This surge would be driven by soaring hyperscaler demand, slowing supply growth, and rising liquefied natural gas (LNG) exports. Hyperscalers, the report warns, may be ill-prepared for such price shocks.
“I think everyone in the energy markets has been lulled into a sense that gas prices can’t go up,” Peter Gardett, CEO of Noreva, told TechCrunch. “You just need simple arithmetic to get to a much tighter gas market than you were in just a few years ago.”
Hyperscalers’ Big Bets
Cheap natural gas has prompted hyperscalers to secure significant market share. In March, Meta announced plans to build a massive 7.5-gigawatt natural gas power plant in Louisiana to support its Hyperion data center. A few days later, Microsoft and Google each revealed intentions to construct gigawatt-scale gas plants in Texas. Amazon, not to be outdone, is planning a 7.6-gigawatt gas facility in Texas, which could become the largest climate polluter in the U.S.
For companies that historically avoided large capital expenditures, the data center boom has forced them to invest heavily in physical infrastructure and navigate unfamiliar energy markets. Gardett noted that at least one investor was “surprised” by the level of natural gas price risk hyperscalers are willing to assume. “They’re doing things that are not normal for an off-taker to do,” he said.
Noreva projects that natural gas prices could exceed $10 per million BTUs at certain hubs, or delivery points for futures contracts. Currently, prices range from about $2 to $4.50 per million BTUs, with the widely traded Henry Hub in Louisiana priced just under $3.
Fuel accounts for roughly half the cost of electricity from a large power plant. Therefore, a doubling or tripling of natural gas prices could make “bring your own power” AI data centers significantly more expensive to operate. This could drive up token costs or push hyperscalers back to the grid, leading to higher electricity prices for everyone.
For now, natural gas prices appear stable, and futures contracts are not anticipating major changes. “It’s not an unreasonable bet,” Gardett said, “but I’m not convinced they’re right.”
Surging Demand
Natural gas prices have remained steady due to years of relatively flat demand and consistent supply additions, which have offset declining production at older wells, Gardett explained. He expects energy companies will continue to add supplies, but at a slower pace than before. Additionally, new wells are becoming more expensive to develop.
The convergence of rising hyperscaler demand, constrained supply growth, and increased LNG exports creates a perfect storm for price volatility. As 2026 unfolds, hyperscalers must weigh the risks of their fossil fuel dependence against the urgency of meeting AI-driven power needs. While the bet on natural gas may seem pragmatic today, the long-term implications could challenge their bottom lines and sustainability commitments alike.
via TechCrunch AI