Google (GOOGL) Strikes Power Deals to Cut Data Center Usage During Peak Demand

Google GOOGL -0.18% ▼ said it has signed agreements with five U.S. electric utilities to reduce its electricity usage during periods of peak demand. This move comes as the tech company looks for ways to secure enough power for its fast-growing data centers, which are critical for AI development. In fact, limited power supply and slow infrastructure buildouts have made it increasingly difficult for large tech companies to access the energy they need.

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As a result, companies are starting to take more creative approaches in order to manage power constraints. In some cases, tech firms have even considered building their own power plants or restarting old nuclear facilities to meet demand. This is especially important for Google because its agreements use a “demand response” model, in which the company agrees to temporarily reduce electricity usage at certain data centers when the grid is under heavy stress.

Under these contracts, Google may reduce up to 1 gigawatt of electricity usage during peak periods, which is roughly enough to power 750,000 homes. This approach helps utilities manage spikes in demand, which typically occur during extreme weather, while also lowering the risk of blackouts and making the grid more stable overall. However, it makes Google’s need to build its own power sources even more urgent.

Are GOOGL Shares a Good Buy?

Turning to Wall Street, analysts have a Strong Buy consensus rating on GOOGL stock based on 26 Buys and six Holds assigned in the past three months. Furthermore, the average GOOGL price target of $376.57 per share implies 23% upside potential.

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