Big Oil Is Suffering Despite the AI Energy Boom

AI seems to be the tide that raises all energy boats. Policymakers and private enterprises around the world are adopting an all-of-the-above approach to energy sourcing – clean energy pledges be damned – in order to shore up energy security in an era of unprecedented flux. Governments around the world are greenlighting new projects to boost energy production as fast as they can in an attempt to stay one step ahead of looming energy shortages, while tech moguls bet big on proven as well as unproven energy technologies. But while the AI boom is boosting investments for energy sources from geothermal to nuclear fusion, the world’s biggest energy source is missing out on the influx of cash that seems to be flowing into every other sector.

Or rather, the amount of AI-inspired dollars flowing into Big Oil’s coffers simply isn’t enough to offset the considerable headwinds faced by the sector today. Despite a rabidly supportive policy environment in the United States and ever-increasing sanctions on Russia, The Economist reports that “times are surprisingly tough for the industry.” Even with ballooning energy demand projections, oil demand has remained soft, and global oil producers are steadily building up a serious oil glut with no signs of relief.

Earlier this month, the International Energy Agency raised its estimate for next year’s oil glut, predicting a record oversupply for 2026. According to the agency’s official estimates, global oil supply will exceed demand by nearly 4 million barrels a day, potentially breaking the record for the biggest supply glut in history in annual terms.

Oil companies have been underperforming since before this increased projection hit the markets. “Since the start of last year the S&P 500 index of large American companies has produced a total return, including dividends, of 46%,” reports The Economist. “By contrast, American pedlars [sic] of oil and gas, including giants such as Chevron and Exxon, have returned just 14%.”

Meanwhile, seemingly every other energy sector is going gangbusters. Money is pouring into nuclear energy startups at such a rapid clip that there are rumblings of a bubble. Last year, private equity and venture capital investments in advanced nuclear companies hit an all-time high, “surpass[ing] the total deal value of the past 15 years combined” according to S&P Global.

Even nuclear fusion, which does not yet exist in any commercially viable form, is receiving a windfall of research and development dollars, riding on the back of the AI boom. Sam Altman, the founder of OpenAI – the firm behind ChatGPT – and arguably the number one poster child of the AI sector, is also one of the world’s biggest proponents of and investors in nuclear fusion technology. He has personally poured hundreds of millions of dollars into nuclear fusion startups and headed one of the world’s buzziest potential fusion unicorns, Oklo. in part thanks to his high-profile confidence in the technology’s singular ability to meet AI’s future energy needs, a report by E.U. firm Fusion for Energy finds that the sector’s total funding has skyrocketed from US $1.7 billion in 2020 to US $15 billion as of September 2025.

At the same time, the geothermal energy market is emerging from niche status into mainstream energy investment portfolios. In 2023, the global market for geothermal energy was valued at USD 7.4 billion. It’s projected to reach a whopping USD 12.51 billion by 2032. The investment dollars are piling up as Big Tech gets bullish on the baseload clean energy. Meta and Alphabet (the companies behind Facebook and Google) are listed among the growing number of Silicon Valley firms partnering with geothermal startups. Earlier this year, Cindy Taff, chief executive of geothermal company Sage Geosystems, told The Hill that “It’s going to be the decade of geothermal.”

But while even the most fringe and emergent forms of energy are soaring to new heights from the AI boom, Big Oil is struggling to benefit from the windfall. Even as Wood Mackenzie pushes back peak oil projections to 2032, supermajors are resorting to layoffs and handing out dividends instead of reinvesting in expansion in what The Economist calls “a sure sign that Western oilmen are feeling downcast about their industry’s growth prospects.”

By Haley Zaremba for Oilprice.com

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