The U.S. investment projects that South Korea and Japan have finalized with the Donald Trump administration share one feature: they are concentrated in power plant construction. Most of the selected sites are places where data centers, the core infrastructure for artificial intelligence, are already clustered or slated to be built. That is why analysts say the United States is using allied investment as leverage to ease the power bottleneck that has emerged in advanced industries.
Korea and Japan to Supply the Power Running U.S. Data Centers
The first U.S. investment project agreed by Seoul and Washington on the 1st is a gas-fired combined-cycle power plant to be built in Encinal, Texas, at a total cost of $23.3 billion (about 31.75 trillion won). Global real estate developer Related Companies and NextEra Energy, the largest power plant operator in the United States, are leading the project, with Texas natural gas supplier Lewis Energy Group providing infrastructure including the site, natural gas and water. The plan calls for the start of commercial operation of the first phase in 2029, with the full facility going online in stages by 2032.
The two countries also agreed on a "Korea-U.S. nuclear framework" for the construction of eight large nuclear reactors in the United States. At least two of them will be built using the APR1400, a Korean-designed reactor. The U.S. investment fund will provide a total of $120 billion (about 163 trillion won), including $100 billion in construction costs and $20 billion in contingency funds. The signatories are the two governments, Westinghouse, KEPCO and Korea Hydro & Nuclear Power.
The second batch of U.S. investment projects agreed by Washington and Tokyo in March is also dominated by power plants. Pennsylvania, where the two countries agreed to spend $17 billion (about 23 trillion won) on a 4.3-gigawatt natural gas plant, is a region where AI power demand is rising sharply in the United States. It is also where Amazon said last year it would invest at least $20 billion to build an AI and cloud data center campus. Tennessee and Alabama, where small modular reactors will be built under the lead of GE Vernova Hitachi, a U.S.-Japan joint venture, already host large data centers operated by Big Tech firms including SpaceX, Google and Meta. Texas, where both South Korea and Japan will build gas-fired plants, is the world's most closely watched data center hub.
U.S. Has the GPUs, but China Is Several Steps Ahead on Power
Power, however, is the weak link for the United States in its AI rivalry with China. While the United States leads in technology such as AI accelerators and software, China is several steps ahead on electricity. According to Our World in Data, U.S. power generation last year was 4,520 terawatt-hours, less than half of China's 10,583 TWh.
Citadel Securities said in a recent report that China will add nearly six times more generation capacity than the United States over the next five years, while the United States will struggle with grid interconnection, permitting procedures and local opposition to data centers. U.S. outlet Business Insider interpreted the findings as a warning that the U.S. power bottleneck could hand China an advantage in AI.
The same holds for transmission grids. Inter-provincial and inter-regional transmission capacity in China stood at 370 GW last year, according to the National Energy Administration. By simple calculation, that is enough to simultaneously carry the instantaneous output of 370 one-gigawatt nuclear reactors.
The United States has also moved to expand its grid, but it still has a long way to go compared with China. The Department of Energy plans to expand long-distance transmission capacity by 16% from current levels by 2030 and to build about 75 million miles (about 12,000 kilometers) of new transmission lines. Last month it announced a project providing a combined $5.25 billion (about 7.16 trillion won) to 31 grid projects across 26 states. Even so, the department itself has acknowledged that additional transmission infrastructure is urgently needed to operate a stable grid.
Building With Foreign Money: An Eye on the Midterms
With midterm elections next month, there is also a calculation at work: sending voters the message that large foreign investment will improve the U.S. power situation. Resentment is spreading quickly in the United States over the view that data centers are pushing up electricity bills and adding to living costs.
Opposition to data centers is also intense in the regions where South Korea and Japan plan to build power plants as part of their U.S. investments. A prominent example is Texas Gov. Greg Abbott, a Republican, who halted all approvals of new data centers in the state, citing local opposition. That has put him at odds with Trump, who has expressed irritation at opposition to data center construction, calling it work that serves China.
Elsewhere, the United Arab Emirates is spending $20 billion to build data centers in eight U.S. states, and Taiwan's TSMC is building a wafer plant in Arizona — moves also seen as aimed at securing the infrastructure and semiconductors that are AI bottlenecks.
