Microsoft CEO Satya Nadella gestures as he speaks during the World Economic Forum (WEF) annual meeting in Davos on January 20, 2026. (Photo by Fabrice COFFRINI / AFP via Getty Images)
Fabrice Coffrini | Afp | Getty Images
Energy costs will be key to deciding which country wins the AI race, Microsoft CEO Satya Nadella has said.
As countries race to build AI infrastructure to capitalize on the technology’s promise of huge efficiency gains, Nadella told the World Economic Forum (WEF) on Tuesday that “GDP growth in any place will be directly correlated” to the cost of energy in using AI.
He pointed to a new global commodity in “tokens” — basic units of processing that are bought by users of AI models, allowing them to run tasks.
“The job of every economy and every firm in the economy is to translate these tokens into economic growth, then if you have a cheaper commodity, it’s better.”
Hyperscalers like Microsoft have been spending billions on building out data centers to power AI.
Microsoft said at the start of 2025 that it expected to spend $80 billion on the construction of AI data centers. A total of 50% of the tech giant’s spending is outside of the U.S., Nadella said.
“I would say we will quickly lose even the social permission to actually take something like energy, which is a scarce resource, and use it to generate these tokens, if these tokens are not improving health outcomes, education outcomes, public sector efficiency, private sector competitiveness across all sectors,” Nadella said.
Europe has some of the highest energy costs in the world, which rose after Russia’s full-scale invasion of Ukraine in 2022 and the subsequent sanctions.
“It’s not just the production side,” Nadella said. “If you think about the TCO [total cost of ownership] it’s like, are you a cheap producer of energy? Can you build the data centers? What’s the cost curve of the silicon in the system?”
How Europe can get competitive
Turning to Europe, Nadella said the region needs to have more of a global outlook to be successful in the age of AI.
“European competitiveness is about the competitiveness of their output globally, not just in Europe,” he said. “I think sometimes when you come to Europe, there’s a lot of conversation about just Europe.”
The European economy has thrived in the past 300 years because the continent was able to produce things the world needed, said Nadella, adding that to do that again the continent has to invest in having energy and tokens needed to power AI in the region.
“Whenever we come to Europe, everyone’s talking about sovereignty,” he said. “Guess what, Europe actually should be much more concerned about access to their industrial companies, their financial services companies…as opposed to just thinking that somehow, by protecting Europe, you’re going to be competitive.
“You are only going to be competitive if the products coming out of Europe are globally competitive,” he said. “That’s, I think, what needs to change.”
Rebecka Redner
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