Climate and AI: The Data Center Boom Redirects Capital

In New York, Climate Week was dominated by AI. Capital is flowing into energy and infrastructure at the pace of data center construction, while founders are raising alarms about blind spots. PitchBook data indicates a marked rebound in fundraising, but the window may be time-limited.

A Window Opening to Sell and Grow

Several players believe that the momentum driven by data centers will not last forever, but it could extend long enough for startups to build sustainable businesses. Commercially, the situation has changed: three years ago, many startups struggled to find funding, even with promising results. Today, numerous clients are requesting demonstrations. Entrepreneurs acknowledge they are adapting to this new demand, while also noting that the AI boom is starting to weigh on some.

Funding Resumes, Driven by AI and Energy

According to PitchBook, the value of venture capital investments in climate technologies has increased for four consecutive quarters, reaching $14 billion in the first quarter of this year. This marks the best fundraising environment for the sector in several years. The majority of transaction value comes from sectors boosted by data center construction, such as the built environment, network infrastructure, and dispatchable energy. Startups that have tailored their messaging to AI have successfully attracted funding, allowing many of them to secure new capital. This recovery extends a trend observed over the past year, following a period where climate companies struggled to raise funds due to canceled federal grants or investor hesitation. Many teams, often focused on or related to energy, see this wave as an opportunity to cross the "valley of death."

Tensions: Gas Plants, Overlooked Sectors, and the Pace of AI

Concerns are being raised about the proliferation of natural gas plants intended to provide energy to AI-focused data centers. This shift towards AI could overlook certain promising areas of climate-related technologies, including those advancing without relying on AI. Several founders believe that the data center boom is diverting attention from other sectors. During a panel at Climate Week in New York, two founders stated they would prefer the development of AI to continue at its current pace rather than at a more climate-friendly speed; their startups operate in the energy sector. AI took center stage at the event, benefiting part of the climate ecosystem, but without garnering widespread support. One founder noted that companies remain motivated by climate issues, but large corporations refrain from doing more, primarily out of fear of incurring the wrath of the Trump administration.