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Power-Hungry Crypto & AI | October 2025

October 15, 2025 by

We tend to take electricity for granted, but that luxury may not last forever. Two major new factors—bitcoin manufacturing and artificial intelligence-specific servers—are now gulping more terawatt hours than any comparable innovations in history.

To be specific, bitcoin’s annual energy consumption reached 173 terawatt hours in 2025—an astonishing 0.78% of the entire global electricity demand, roughly comparable to the energy consumption of Poland. Every single bitcoin transaction consumes 1,335 kilowatt hours of energy, roughly equivalent to the power consumed by an average U.S. household in 45 days. A competing cryptocurrency, Ethereum, uses 840 kilowatt hours for every transaction.

Meanwhile, the U.S. currently houses 3,000 AI data centers around the country, run by tech giants like Amazon and Microsoft. AI models are loaded onto clusters of servers each containing special chips called graphics processing units (GPUs) that have a voracious appetite for electricity. A large data center might have more than 10,000 of these chips connected together, along with a network of fans to keep them from overheating. A recent article in the MIT Technology Review estimated that AI servers today consume between 53 and 76 terawatt hours a year, enough to power roughly 7.2 million homes for a year. In all, data centers use roughly the amount of electricity that it takes to power the nation of Thailand.

And the AI technology is still catching on. As more people spend more time recruiting ‘AI assistants’ for writing, graphic design and helping them think through problems, that figure is likely to rise exponentially. By 2028, the most conservative estimates suggest that AI-specific power consumption will reach 165 to 326 terawatt hours per year—12% of all electricity consumed in the U.S..

Between crypto and AI, electricity bills have risen about 6% nationwide in the last few years , which means that all of us are bearing the cost of new infrastructure and power facilities that have to be built to accommodate the strain caused by new sources of demand. In addition, because of the heat generated by the newer chips, data centers are consuming ever-increasing amounts of another endangered commodity: fresh water. Researchers at UC Riverside have estimated that the global use of AI could require as much fresh water in 2027 as that now used by four to six countries the size of Denmark.

So far, we haven’t seen blackouts in areas like Silicon Valley, Austin, TX or northern Virginia, which have the heaviest concentrations of data center buildings. We haven’t seen dramatic shortages of fresh water. But give it a few years; these are headlines waiting to happen.

FED FUNDS IMPACT

 

Whenever the Federal Reserve Board meets to decide whether to cut or raise the fed funds rate, the breathless coverage might make you believe that an earthquake is about to rumble through the economy. But what, exactly, is the impact of the recent (September 17) 0.25% rate cut, and the expected additional cut sometime later this year?

The federal funds rate doesn’t affect any of us directly. It is the interest rate that banks charge each other for overnight loans—loans backstopped by the central bank. When that interest rate goes down, banks are able to borrow, and lend, at lower rates and maintain their profit margins. Rate cuts are sometimes accompanied by lower mortgage rates on home purchases—but that hasn’t been our recent experience. Three rate cuts at the end of 2024 saw no reduction in mortgage rates, and the most recent cut saw an actual increase, due to a higher yield on 10-year Treasury bonds.

A lower fed funds rate also tends to lower the variable annual percentage rate on credit cards—but the impact tends to take some time to kick in, and should be seen as minimal. The current average rate of 20.12% might decline slightly. For a $5,000 credit card balance, the monthly interest payments may go down a couple of dollars.

On the other side of the balance sheet, when the fed funds rate goes down, banks immediately reduce their interest rate on savings accounts and money market funds. If your savings account previously offered a 4.5% rate, that could now drop to 4.25%, slightly reducing the incentive to maintain large sums in the bank. The idea is to get people spending rather than saving, which boosts the economy. Alternatively, people might be slightly more inclined to invest in stocks, which gives a bit of a tailwind to the market indices.

Finally, any reduction in interest rates can be seen as an incentive for corporations to borrow—in order to build new factories or conduct research and development. This is regarded as the biggest potential economic boost, but a small rate reduction can be washed out by uncertainties like rising inflation, rising unemployment and tariffs.

This probably doesn’t sound like an earth-shaking event, and at this point, the Fed’s action is more of a signal than an impact. Lowered rates are a signal that the Fed’s economists are worried about unemployment and a recession ; a rate rise tells us that the Fed is more worried about inflation and an overheated economy. And when you get down to it, a rate cut of 0.25% represents a very cautious signal, with little real-world impact.

2025 THIRD QUARTER INVESTMENT REPORT

 

Whew! The U.S. equity markets kept testing new highs through the month of September—the month which has seen some of the biggest market downturns in our economic history. The price/earnings ratio (currently above 27) for the S&P 500 is actually higher than it was right before the 1987 and 2000 stock market crashes. Reaching these highs in the tricky month of September might have been a recipe for a significant market event—which can generate panic selling at the bottom and the regretful sabotage of sound retirement portfolios.

A breakdown shows that just about every U.S. investment category experienced moderate to robust quarterly gains. The Wilshire 5000 Total Market Index—the broadest measure of U.S. stocks—gained 8.24% in the third quarter of the year, and now stands at a positive 14.45% for the year. The comparable Russell 3000 index is now up 14.40% for the year.

Looking at large cap stocks, the Wilshire U.S. 2500 Large Cap index gained 8.14% in the recent quarter, and is now up 14.49% for the year. The Russell 1000 large-cap index is up 14.60% since the end of December , while the widely-quoted S&P 500 index of large company stocks gained 7.79% in the third quarter, to bring investors a 13.72% gain for the year so far.

The Russell Midcap Index was up strongly for the second quarter in a row, standing at a 10.42% gain through the end of September. As measured by the Russell 2000 Small-Cap Index, investors in smaller companies are sitting on a 10.39% gain for the year after a big third quarter rally. The technology-heavy Nasdaq Composite Index gained 11.24% in the third quarter, and is now up 17.46% for the first three quarters of 2025.

Foreign markets are still outpacing the U.S. equity scene. The broad-based EAFE index of companies in developed foreign economies gained 4.80%, in dollar terms, in the third quarter of 2025, now delivering a robust 25.70% return for the first half of the year. Emerging market stocks of less developed countries, as represented by the EAFE EM index, gained 10.90% in dollar terms in the recent quarter, posting a 26.60% gain for the first three quarters of 2025.

Real estate securities have recovered their losses. The Wilshire U.S. REIT index gained 4.73% in the recent quarter, taking its return up 4.47%. Commodities returns are up slightly: the S&P GSCI index posted a 1.26% return in the 3rd quarter, and is sitting on a narrow 0.06% positive return for the year. Utility stocks, as measured by the S&P 500 Utilities index, rewarded investors with a 6.84% gain in the third quarter, leading to an 15.13% gain for the year so far.

In the bond markets, the yield inversion continues. Treasuries of 3-month (3.92%) and 6-month (3.82%) duration are yielding more than government securities with 1-year (3.57%) and 5-year (3.74%) durations. 30-year government bonds are holding steady at 4.75%; 10-year maturities are yielding 4.25%. Five-year municipal bonds are yielding 2.31% in aggregate, while 30-year munis are yielding 4.30%.

The economic and corporate news continues to be positive heading into the final three months of the year. Both the Nasdaq and the S&P 500 indices posted their best September returns in 15 years, gaining 5.6% and 3.5% respectively. The large cap companies that make up the S&P 500 are projected to see 7.9% year-over-year earnings growth in the third quarter, which, if it holds up, would mark the ninth consecutive quarter of growth.

Economists, who seem to be paid to worry and raise alarm bells, have noted that the inflation rate has been stubbornly above the Federal Reserve’s 2% target (currently 2.92%, up from 2.7%) , and nearly a million fewer jobs were created in the U.S. in the most recent 12 months than in the prior time period—a sign that the unemployment rate could be ticking up with the next report. The on-again, off-again tariffs create additional uncertainty, although most economists now seem to think they will generate only a temporary rise in consumer prices.

Meanwhile, the recent 0.25% rate cut by the Fed was designed to give the economy a mild boost, and many economists are expecting a second cut between now and the end of the year. We won’t get the next quarterly GDP report until October 30, covering the third quarter, but the 3.8% GDP increase in the second quarter is encouraging.

By far the biggest unknown is when Congress will end its stalemate and the government will be back in business from the current shutdown. A prolonged shutdown would allow the President to fire tens of thousands of government workers—something the Democratic representatives are unlikely to favor. Both sides are playing politics at the moment, hoping the American voters will put the blame on the opposite side of the aisle.

Even so, a brief shutdown might not be tremendously damaging to the American economy. Air traffic controllers and Transportation Security Administration employees are considered essential workers and would keep the airports running. The postal service wouldn’t shut down. There would be delays in Social Security and VA services, but otherwise the biggest impact would be felt by federal workers and active-duty military service members who would not receive a paycheck during a government shutdown—and then have their lost wages made up when the stalemate ends. The longest-lasting shutdown, from late 2018 into the following January, lasted just 35 days, and by all accounts had minimal lasting economic impact.

In other words, the data is a confusing jumble of signals that tell us very little about the future, and particularly the future of the investment markets. We know that a downturn is somewhere in our future, and that someday the economy will experience another recession. And we also know that, based on the historic growth of the economy and the companies that make it up, these things don’t really matter much in the long term.

 

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Disclaimers:

Past performance is not a guarantee of future results. Indices are unmanaged and one cannot invest directly in an index. All investments contain risk and may lose value. Investing in the bond market is subject to certain risks including market, interest rate, issuer, credit and inflation risk. Equities may decline in value due to both real and perceived general market, economic and industry conditions. Investing in securities of smaller companies tends to be more volatile and less liquid than securities of larger companies. Investing in foreign securities may involve heightened risk including currency fluctuations, less liquid trading markets, greater price volatility, political and economic instability, less publicly available information and changes in tax or currency laws. Such risks are enhanced in emerging markets.

Material discussed is meant for general informational purposes only and is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice. This article was written by an independent third party. It is provided for informational and educational purposes only. The views and opinions expressed herein may not be those of Guardian Life Insurance Company of America (Guardian) or any of its subsidiaries or affiliates. Guardian does not verify and does not guarantee the accuracy or completeness of the information or opinions presented herein. Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). Securities products and advisory services offered through PAS. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly-owned subsidiary of Guardian. LIVING LEGACY FINANCIAL INSURANCE SERVICES LLC is not an affiliate or subsidiary of PAS or Guardian. This material is intended for general use. By providing this content, Park Avenue Securities LLC and your financial representative are not undertaking to provide investment advice or make a recommendation for a specific individual or situation or to otherwise act in a fiduciary capacity. Guardian, its subsidiaries, agents and employees do not provide tax, legal, or accounting advice. Consult your tax, legal or accounting professional regarding your situation. | 8362804.1 Exp. 09/27