Wall Street giants to make $50 billion bet on AI and power projects

The investment is a bet on AI’s huge energy needs and the mounting stress it is putting on the U.S. power grid. Much of it will be invested over the next four years, the companies said.

KKR, one of the world’s largest investment companies, and Energy Capital Partners, a private-equity firm, have each been spending heavily on the infrastructure underpinning the AI boom. The companies said they are now working together with large tech companies to accelerate their access to electricity, which has become constrained in parts of the U.S. as data-center developers compete for power sources and access to the grid.

“The capital needs are huge, and one of the big bottlenecks—maybe the bottleneck—is electricity availability," ECP founder and senior partner Doug Kimmelman said.

ECP owns companies that operate conventional power plants as well as renewables, including Calpine, one of the country’s largest power generators. ECP recently expanded its portfolio of natural-gas-fired plants, which Kimmelman said will be critical in supplying round-the-clock power to data centers. He said he anticipates making additional investments in gas while exploring ways to reduce carbon emissions with renewables or developing technologies such as carbon capture and sequestration.

“Gas is going to be at the forefront of this," Kimmelman said. “It can back up those intermittent renewables very nicely."

Natural-gas plants are among the fastest solutions to AI’s power needs, but present the country’s largest tech companies with a conundrum. Tech companies have been leaning heavily on fossil fuels to power their data centers, which is making it hard for them to honor their pledges to reduce carbon emissions while pushing to accelerate AI development.

Each tech company is now trying to speed the development of more clean electricity sources.

Microsoft, Google and Amazon have said they would invest billions of dollars to bring more nuclear power online. Some of the projects depend on unproven next-generation technology, and each is slated to take years to complete, in part because of financial and technological challenges that have limited the growth of the U.S. nuclear industry for decades.

For now, sustainability commitments are taking a back seat to tech companies’ desire to rapidly build data centers, according to consulting firm McKinsey.

Waldemar Szlezak, who leads KKR’s digital-infrastructure investments, said the company’s partnership with ECP is meant to target near-term solutions to expand power access and ease the hurdles tech companies are facing in building data centers. To date, KKR has invested more than $29 billion in digital infrastructure companies.

“Data centers are no longer a real-estate business. They are actually a power-first business," Szlezak said. “The status quo is no longer acceptable in solving this."

Write to Katherine Blunt at katherine.blunt@wsj.com