00:00Inside Northern Virginia's data center alley facilities, massive servers process enormous
00:14volumes of data, fueling the US race against China in artificial intelligence. But behind
00:20this technological surge lies a growing vulnerability. America's AI industry, and even its military,
00:26depend heavily on one critical technology dominated by China batteries.
00:34Modern data centers consume as much electricity as a small city. Even brief power flickers can
00:40have cascading consequences, corrupting sensitive AI coding, damaging hardware, or causing what
00:46experts call silent data corruption, where systems produce incorrect results without
00:52obvious signs of failure. To prevent this, tech companies rely on massive lithium-ion
00:58battery systems to provide instant backup power while generators activate. These facilities
01:04aim for the five nines of reliability, engineers say, meaning they try to stay online 99.999%
01:10of the time. AI has dramatically intensified power needs. According to the Electric Power
01:21Research Institute, a single AI query can use 10 times more electricity than a traditional
01:27internet search. Power demand inside data centers can fluctuate sharply multiple times per minute,
01:34creating sudden surges of tens or even hundreds of megawatts. Microsoft researchers have warned
01:40that, at scale, these swings can damage power grid infrastructure. And in one experiment,
01:45researchers found that a silent data corruption error actually broke the model, highlighting
01:51the stakes involved. To manage these challenges, U.S. tech companies are spending billions
01:58on lithium-ion batteries. But China dominates this industry. China is leading in almost every
02:04industrial component, said Dan Wang, an expert on China's technology sector at Stanford's Hoover
02:10Institution. They're ahead, both technologically and in terms of scale. China currently produces
02:1799% of the world's lithium-ion phosphate, or LFP, battery cells, according to the International
02:24Energy Agency, along with more than 90% of key components like cathodes and anodes. A short drive
02:32away from the data centers, U.S. military planners are raising similar alarms. Modern warfare,
02:38as seen in Ukraine, is increasingly powered by batteries. Drones, lasers, night vision systems,
02:44radios, satellites, and electronic warfare tools all depend on advanced battery systems. According
02:51to defense analytics firm Govini, U.S. military programs rely on Chinese supply chains for roughly
02:576,000 individual battery components. There are foreign parts in 100% of our weapons systems
03:03and military platforms, said Tara Murphy-Doherty, Govini's CEO.
03:11The war in Ukraine has underscored this vulnerability. Chinese export controls have already slowed Ukrainian
03:17drone production and tripled prices for some battery components. Every Chinese export restriction
03:23since 2022 has reverberated directly onto the battlefield, said Katarina Bukatsky, a defense
03:30expert at the Snake Island Institute. She warned that the same components Ukraine struggles to secure
03:37are embedded across Western defense programs. China is acutely aware of its leverage. On October 9th,
03:46amid escalating trade disputes, Beijing threatened to restrict exports of advanced lithium-ion technologies,
03:53including graphite nodes and cathodes. These materials are fundamental to battery performance
03:59and are difficult to replace quickly. Experts warn this creates a strategic choke point for the United
04:05States. This leaves the Trump administration facing a policy contradiction. Early in President Trump's
04:12term, billions of dollars in Biden-era battery manufacturing grants were frozen, grouped with
04:17electric vehicles, solar, and wind projects the administration had sought to deprioritize.
04:23Trump has frequently criticized electric vehicles, calling them a scam.
04:28But administration officials now acknowledge batteries are critical,
04:31not for climate goals, but for AI leadership and national defense.
04:38In recent weeks, the White House has held high-level meetings focused on battery supply chains.
04:43The National Energy Dominance Council has met with battery companies.
04:47The Energy Department has quietly allowed many Biden-era battery grants to proceed,
04:52and announced up to $500 million for battery materials and recycling projects.
04:57The administration has also invested in companies like EOS, a next-generation battery firm,
05:02and secured commitments from Japan to invest billions in US battery manufacturing.
05:07The 2025 National Defense Authorization Act includes new Pentagon restrictions on purchasing batteries from
05:16foreign entities of concern, primarily China. A defense logistics agency white paper now classifies battery
05:23technology as mission-critical. When we think about the future of manufacturing and defense,
05:29said Elaine Dozenski of the Foundation for Defensive Democracies, the chips are the brain and batteries are the heart.
05:38Despite these efforts, experts warn building a domestic battery industry will be extremely difficult.
05:44China's dominance extends beyond manufacturing to refining lithium, graphite, and other raw materials.
05:50Environmental regulations in the US make refining more expensive and slower than in China.
05:55Analysts estimate it would take at least five years for US manufacturers to produce enough
06:01LFP cells to meet domestic demand, and much longer to replicate China's supply chains.
06:08IEA Executive Director Fatih Birol compared the situation
06:12to Europe's former reliance on Russian natural gas.
06:16Reliance for a strategic commodity or technology on one single country,
06:20he said, is always risky. The AI race, experts say, now hinges as much on electricity infrastructure as on computer chips.
06:30OpenAI has warned that electricity itself is becoming a strategic asset.
06:35Electricity is not simply a utility, the company wrote.
06:39It's a strategic asset that will secure our leadership on the most consequential technology
06:45since electricity itself. China's lead in batteries feeds directly into its dominance in power generation,
06:52including renewables. Battery companies are responding. Group 14.
06:59Technologies received a 200 million federal grant to produce a graphite alternative,
07:04but saw funding delayed after Trump took office. The Energy Department later allowed the project to continue.
07:10This isn't about left versus right or green versus not green, said Rick Luebe, Group 14's CEO.
07:17Still, he acknowledged US production can only displace a fraction of Chinese materials.
07:25Experts note contradictions remain. The Trump administration has softened its tone on batteries,
07:31said Noah Gordon of the Carnegie Endowment, but the policy is still incoherent.
07:35Boosting battery manufacturing while undermining electric vehicle demand may weaken long-term viability,
07:42analysts say.
07:45As America races to dominate artificial intelligence and prepare for future conflicts, batteries have
07:51emerged as a strategic bottleneck. From data centers to drones, the same technology underpins both
07:58economic competitiveness and military readiness. For now, China remains at the center of that supply chain.
08:05And whether the United States can break that dependence quickly enough may shape the balance of power in the decades ahead.
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