The Bhutanese Leading the way.
On 20th January 2025, the Chinese Artificial Intelligence start up DeepSeek launched DeepSeek-R1, an open sourced AI model which is cheaper to train and comparable to OpenAI’s o1 AI model in performance.
The launch and the performance of DeepSeek led to a major slump in tech stocks in USA with high tech and AI chip maker Nvidia losing around USD 600 bn in value, with a 16% slump, Broadcom losing 17.4%, Microsoft (main backer of OpenAI) losing 2.14% and Alphabet which owns Google losing around 4%.
The decline at the time, however, was not just in tech stocks but power companies in the USA also saw major decline in shares as US power companies focused on selling power to AI Data centers, like Constellation Energy lost around 20% in stock value, rival Vistra lost around 30% and Talen Energy lost around 22%.
These same companies made huge gains up to 100% in stock value in 2024 on the forecast for huge energy demand by AI data centers.
The shares slumped as DeepSeek is much more energy efficient than its US counterparts with some estimates showing even 10% of the energy use.
Why all of the above international tech and power developments impact Bhutan is that hosting AI Data Centers is a major economic priority sector for Bhutan in the near future.
Bhutan is ramping up its power production with a 15,000 MW target by 2040 and 25,000 MW target by 2050. One of the uses of the power is aimed at supplying power hungry AI data centers. AI Data centers store huge amounts of data, and it is used to train AI models and also perform analysis and tasks. All AI companies are spending tens of billions of dollars on Data Centers including major investment companies.
The ‘Bhutan’s 21st Century Economic Roadmap- A 10X National Economic Vision’ launched on Friday in Changlimithang, Thimphu, lists out 8 priority economic sectors till 2050 to have 10 times the GDP of today by 2050.
The document says that under the Digital Economy priority, Bhutan will be establishing AI-ready, eco-friendly data centers and fostering an environment for digital and technology businesses that will serve multiple sectors.
A senior government official said that for AI Data Centers, the plan is to reach out to foreign investors and the main USP will be branding Bhutan’s AI Data Centers as ones powered by clean and green energy.
Bhutan’s Bitcoin digital mines currently consume a significant amount of green power and has been a very profitable and timely investment for the country. However, the bitcoin rewards will reduce with a halving event every four years where the number of coins is reduced by half.
The last halving was in April 2024 when the reward of mining blocks reduced from 6.25 to 3.125 bitcoins per block mined. This will further halve in April 2028. This means the hash rate or difficulty rate to mine will be all the harder in four years. Bitcoin will still be very valuable then with its value expected to increase as it has done after every halving but the difficulty will be higher for a lower reward.
A plan ‘B’ for the high power consumption by bitcoin mining is to deviate this power to AI Data Centers.
DeepSeek may just be the start of more efficiency in the AI race as more efficient and less power consuming models come along.
The big question now is, if DeepSeek and its competitors can upend Bhutan’s AI Data Center plans and also impact its power building spree.
While Bhutan needs to be cautious and keep a close eye on AI developments, there is no reason to panic yet. Blackstone which has invested USD 80 billion in data centers it is building for Amazon, Google and Alphabet is holding firm, and is optimistic about data center demand.
Even in the US, for the power sector, after the initial panic of DeepSeek, investor confidence has stabilized given the power demand going into the future.
Experts point out that DeepSeek may be more power efficient, but it will only lead to faster and wider AI adoption and that will mean more data centers and more power demand.
The Bhutanese put the DeepSeek issue to the Druk Holdings and Investment (DHI) and the Druk Green Power Corporation (DGPC), asking if the AI like DeepSeek will impact our hydro plans and what is the backup plan to use the excess power.
DGPC said, “Our demand growth is based mainly on already committed demand including energy intensive industries. Some allocation has been made for GMC. Overall, demand by AI data centers should have only minimal impact on our demand forecasts. Currently we are in a situation of deficit during winter months.”
On the issue of the excess power generated in summer, DGPC said that strategic partnerships are worked around off taking our summer surplus.
A DHI official, on the same question, said, “I take a stance that innovation will happen, and things will be energy efficient. But for ground level models to be trained and data to be utilized for training with the most advanced chips available, and in the horizon, the applications or use cases that we do not even visualize today, will require energy and green energy, in particular.”
The official said that while DeepSeek is a great innovation, and more will come, apple to apple comparison will need to be done to compare the cost of training, and he looks forward to more reports and analysis over the weeks.
“Green energy will always be precious either in AI apps/computing center or in transportation or in automation, storage, hydrogen, etc., but it has to be price competitive and diversified generation portfolio,” said the DHI official.
Bitcoin mining and AI data centers are not the be all and end all of energy use in Bhutan, as Bhutan is expected to explore energy intensive investments like using power to split the hydrogen and oxygen molecules of water and store hydrogen in batteries to use as power later.
Power can also be used in making magnesium. The Gelephu Mindfulness City, itself, will be powered by green energy.
While Bhutan focuses on energy production, another question is how can firm power be shored up for the winter months. Here, a government official said that Bhutan is not just investing in hydro projects, but is also looking at solar and hydrogen. He said within hydro innovations, like pumped storage, are coming in.
Bhutan, while making its economic plans and innovations, will have to keep its finger on the global technological and economic pulse, and be prepared for all kinds of developments and eventualities.
