Hyperscalers might regret their natural gas bet, report warns

Amazon, Google, Meta, and Microsoft have spent years snapping up wind and solar power, but for their AI data centers, they’re now betting heavily on natural gas. A new report from energy research firm Noreva suggests that bet could backfire: natural gas prices could triple in parts of the U.S. in the coming years as hyperscaler demand collides with declining supply growth and rising exports of liquefied natural gas.

“I think everyone in the energy markets has been lulled into a sense that gas prices can’t go up,” Noreva CEO Peter Gardett told TechCrunch. “You just need simple arithmetic to get to a much tighter gas market than you were in just a few years ago.” In March, Meta said it would build a 7.5-gigawatt natural gas power plant in Louisiana to power its Hyperion data center; days later, Microsoft and Google each announced their own gigawatt-scale gas plants in Texas, and Amazon said it plans a 7.6-gigawatt gas plant there too. One investor told Gardett they were surprised by how much natural gas price risk hyperscalers are willing to take on, noting the companies are “doing things that are not normal for an off-taker to do.”

Noreva expects natural gas prices to climb above $10 per million BTUs in certain hubs, up from roughly $2 to $4.50 today (with the widely traded Henry Hub in Louisiana just under $3). Since fuel makes up about half the cost of electricity from a large power plant, a doubling or tripling of gas prices could make “bring your own power” AI data centers far more expensive to run — pushing up token costs, or driving hyperscalers to connect to the grid instead, which would raise electricity prices. Futures contracts aren’t currently pricing in big changes, which Gardett called “not an unreasonable bet,” though he isn’t convinced it’s the right one.

Gas prices have stayed flat thanks to years of steady supply growth offsetting production declines at older wells, Gardett said, but new wells are getting more expensive, and the real shift is that domestic gas markets are finally connecting to global ones just as AI demand pulls harder on supply. Hyperscalers were drawn to Texas and Louisiana in part because gas there was cheap and stranded — a byproduct of oil drilling with few pipelines to move it — but new pipelines now route much of that gas toward export markets, tying local prices to international demand. Already, 80% of consumers say they’re worried about data centers’ effect on their utility bills, a concern that could extend from electricity to natural gas as hyperscalers grow more exposed to a market they have little experience navigating.

Why it matters

If Noreva’s forecast holds, the hyperscalers’ pivot to gas could turn a cost advantage into a new source of volatility for AI infrastructure — one that shows up not just in utility bills, but in the earnings calls of the world’s largest tech companies.