Congress has begun to respond by tightening sourcing rules for defense procurement, including future restrictions on batteries that rely on Chinese materials, but policy changes do not create factories. Even with aggressive use of the Defense Production Act, building domestic or allied capacity for battery materials and processing will take years.
The rapid expansion of AI computing has added another dimension to the battery problem. Training and inference at scale require enormous amounts of power, and data centers increasingly rely on large battery installations for backup and load balancing. These systems are not small UPS units but rather industrial-scale energy-storage deployments measured in megawatt-hours.
As utilities struggle to deliver new generation capacity fast enough, battery-backed power systems have become a critical enabler of AI growth. In practice, many of these batteries are produced by Chinese manufacturers because they are available at scale and at prices that competitors have struggled to match. Cloud providers and AI firms typically face two options: Chinese batteries or no batteries at all.
This dependence sits uneasily alongside U.S. export controls and broader technology competition with China. The same companies racing to build sovereign AI capacity are relying on Chinese energy storage to keep their data centers running. That contradiction is not lost on policymakers, but alternatives remain limited in the near term.
The situation also complicates efforts to localize AI infrastructure. Even if advanced chips are fabricated in Taiwan, packaged elsewhere, and assembled into servers in the United States, the power systems that support those servers may still trace their supply chains to China. That weakens the overall system from a resilience perspective.
Washington naturally wants to respond and unwind the dependency that has built over several decades, but the timeline for doing so is unforgiving. The Inflation Reduction Act and related legislation have triggered a wave of announced battery and EV investments in the United States, often led by foreign firms seeking to qualify for incentives. These projects will expand domestic cell manufacturing capacity, but many still rely on imported materials and components.
Upstream efforts to build lithium refining , graphite processing, and cathode production in North America are underway, supported by federal loans and grants. However, these projects face opposition and cost pressures that slow deployment. Even optimistic projections suggest it will take most of the decade to meaningfully reduce reliance on Chinese processing for key battery materials — and we’re about to enter 2026.
In the meantime, both the Pentagon and the AI industry are being forced to manage risk rather than eliminate it. Defense planners are exploring alternative chemistries, recycling, and limited stockpiling, while tech firms are diversifying suppliers where possible and investing in efficiency to reduce battery demand per unit of compute. None of these measures fully solves the underlying issue.
The only factor that has meaningfully changed is how we view batteries; they are no longer viewed as a peripheral component, but as a technology on par with semiconductors . Energy storage sits at the intersection of computing, transportation, and military power, so control over its supply chain carries significant weight.
China recognized this years ago and treated batteries as a national priority, accordingly building the industrial base to match. The U.S. is only now beginning to respond seriously. Whether its response will be fast enough to keep pace with AI and evolving military needs remains to be seen.
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Luke James Social Links Navigation Contributor Luke James is a freelance writer and journalist. Although his background is in legal, he has a personal interest in all things tech, especially hardware and microelectronics, and anything regulatory.
Key considerations
- Investor positioning can change fast
- Volatility remains possible near catalysts
- Macro rates and liquidity can dominate flows
Reference reading
- https://www.tomshardware.com/tech-industry/SPONSORED_LINK_URL
- https://www.tomshardware.com/tech-industry/how-chinas-control-of-battery-supply-chains-is-becoming-a-critical-risk-for-us-ai-and-defense#main
- https://www.tomshardware.com
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