Why Applied Digital Is Breaking AI's Power Crunch by Reviving 1800s Technology

2026-01-21 02:05:58

The Power Crisis That No One Saw Coming

The artificial intelligence boom has created an unexpected problem for the tech industry: not a shortage of computing chips, not a lack of server space, but sheer electrical power. AI data centers consume staggering amounts of energy, and the electrical grid infrastructure simply cannot deliver power fast enough to meet demand.

This has forced major corporations to get creative. Meta Platforms recently committed to a two-decade partnership with Constellation Energy to restart a nuclear facility in Illinois. Other firms have taken more unconventional routes—some have literally installed retired aircraft engines inside their data centers to generate onsite electricity. Yet even these solutions face a fundamental constraint: they all take years to implement.

The most straightforward answer would seem to be natural gas turbines installed directly at data center sites. However, manufacturers of gas turbines are completely overwhelmed. According to John Ketchum, CEO of NextEra Energy, any new gas-fired power facility won’t be operational until 2032. Major turbine makers indicated last year that new orders face a 7-8 year wait time.

Applied Digital CEO Wes Cummins laid out the problem plainly during recent earnings: placing an order for traditional gas turbines today means delivery won’t arrive until 2031 or 2032—far too late for companies racing to expand AI infrastructure.

When 150-Year-Old Engineering Becomes the Future

Here’s where Applied Digital found an unconventional edge: instead of waiting for new gas turbines that won’t arrive for a decade, the company is turning to proven 1800s power generation technology—steam turbines and boilers.

In November, Applied Digital announced a limited notice to proceed with Babcock & Wilcox, a company that has been manufacturing steam generators since 1867. The partnership will deliver 1 gigawatt of power capacity. B&W will design and construct multiple 300 MW facilities powered by natural gas-fired boilers connected to steam turbine generators, with equipment supplied by Siemens Energy.

The critical difference: these power plants are scheduled to come online by 2028—roughly 3-4 years ahead of competitors stuck in gas turbine waiting lines.

“We’re essentially using boiler technology from coal plants, but powered by natural gas instead,” explained Cummins. “B&W has extensive experience converting coal facilities to natural gas, and that expertise lets us bring capacity to market years sooner.”

The Business Impact That Matters

Applied Digital’s financial performance already reflects the urgency of the AI buildout. In the most recent quarter, the company reported:

Revenue growth of 250% year-over-year, reaching $126.6 million
Delivery of the initial 100 MW of computing capacity at its Polaris Forge 1 facility (with 400 MW total eventual capacity reserved for CoreWeave)
Signing of a 15-year agreement with a major U.S. hyperscaler for 200 MW at Polaris Forge 2, valued at approximately $5 billion

The company aims to expand total capacity to 5 gigawatts within five years, with advanced negotiations underway for an additional 900 MW.

Without a solution to the power constraint, this growth trajectory would stall. By deploying steam turbine technology, Applied Digital gains the ability to sign long-term contracts and lock in clients—enterprises desperate for expanded AI capacity—years before conventional competitors can deliver.

The Competitive Edge Window

This advantage is real but temporary. Once other data center operators recognize what Applied Digital is doing, they can pursue similar arrangements with B&W or comparable engineering firms. The 1800s steam turbine approach isn’t proprietary—it’s available to anyone willing to use older but proven designs.

What matters now is timing. Applied Digital appears to be the first major data center company to embrace steam turbine technology for AI workloads. This first-mover status lets the firm capture high-value multi-year customer commitments during a period of intense supply scarcity.

The AI infrastructure market isn’t slowing down. Demand remains insatiable. By sidestepping the new gas turbine bottleneck through ingenious redeployment of historical engineering solutions, Applied Digital has bought itself years of competitive breathing room—and in the race for AI dominance, that’s worth billions.

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