As the demand for artificial intelligence (AI) continues to surge, the energy requirements for data centers have reached unprecedented levels. Companies like Meta and Alphabet are exploring geothermal energy as a sustainable solution to power these systems, marking a pivotal shift in energy strategies.

Geothermal energy offers a stable and carbon-free electricity source, contrasting with intermittent options like solar and wind. Trey Lowe, CTO of Devon Energy, highlighted the potential of geothermal energy alongside abundant natural gas. "We believe geothermal, together with natural gas, can be part of the energy mix to meet demand," he said. Devon Energy, known for its shale gas production, is a key investor in Fervo Energy, a startup specializing in geothermal energy.

Despite its promise, the geothermal sector faces challenges. High upfront costs for drilling and lengthy permitting processes often deter large-scale investment. Since 2020, geothermal projects have attracted only about $700 million in funding—a stark contrast to the billions funneled into other renewable energy sources.

However, the industry is witnessing a wave of innovation. Over 60 geothermal startups have emerged globally in the past two years, with 10 of the 22 U.S.-based startups founded between 2016 and 2022 headquartered in Texas. These startups aim to lower costs and increase efficiency, making geothermal energy a viable alternative for powering AI-driven data centers.

For instance, Colorado-based Gradient Geothermal utilizes oil and gas infrastructure to generate geothermal energy. The company recently partnered with Chord Energy to produce electricity at one of its North Dakota oil fields. COO Johanna Ostrum explained that small and medium-sized energy companies are exploring geothermal solutions for internal power needs rather than public energy supply.

Sage Geosystems, another prominent player, is developing advanced geothermal and energy storage technologies. The company recently secured $30 million in funding from Expand Energy, a shale gas producer, and plans to open a Series B funding round in January. Cindy Taff, CEO of Sage Geosystems, revealed ongoing discussions with energy giants like Chevron and Shell, although larger firms appear cautious in adopting geothermal technology.

Geothermal's competitiveness lies in its cost advantage. The average levelized cost of electricity (LCOE) for geothermal projects in the U.S. is approximately $64 per megawatt-hour (MWh), lower than natural gas and steam plants ($77/MWh) and nuclear energy ($182/MWh). This affordability positions geothermal as an appealing option for industries requiring constant energy, such as AI-driven data centers.

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