The United States is working to build an AI economy that runs on electricity, yet it is producing less of the equipment that moves that electricity around.

According to analysis shared by venture capital firm a16z (Andreessen Horowitz), US electrical equipment production has fallen 9% since 2019. Over the same stretch, prices for that equipment rose 69%, and power demand from AI kept climbing.

The Numbers Behind the Squeeze

The a16z findings frame the decline as a capacity problem: US electrical equipment manufacturing capacity was down 9% from 2019 levels as of mid-2026. The contrast with other parts of the industrial economy is stark. Over the same period, communications equipment production grew 110%, semiconductors rose 77%, and computers were up 16%.

The 69% price increase is the highest among the manufacturing categories a16z tracked. For two specific product lines, transformers and switchgear, prices have nearly doubled since 2019. These are the workhorse components of the grid: transformers step voltage up and down so electricity can travel efficiently across transmission lines and arrive usable at homes, factories, and data centers, while switchgear is the collection of circuit breakers and switches that routes power and protects the system from faults. New grid connections of any, including the data centers that house AI computing, rely on this kind of equipment.

Busy Factories, Smaller Output

One of the most counterintuitive figures in the analysis involves utilization. Electrical equipment plants are running at 87% utilization, the highest level since 2008, even though overall manufacturing utilization softened during that period. Electrical equipment plants are the exception: they are running hot.

Yet output from existing plants fell 7%, even as utilization increased by 13%. Utilization measures how much of available capacity is being used. If plants are working harder but producing less, the underlying base of capacity has shrunk.

The a16z research described this combination as a sign of inefficiency in production. More effort is going in, and less finished equipment is coming out.

Imports Fill the Gap, at a Price

When domestic factories cannot keep up, buyers look abroad. Imports of transformers and switchgear have surged approximately 80% above 2019 levels to meet demand, according to the a16z findings.

What This Means

The a16z analysis points to potential headwinds for the broader economy and for sectors reliant on power infrastructure, with AI front of mind. Escalating costs and supply shortages could slow growth and push price inflation across technology sectors.

There is an irony worth noting in the data. Much of the conversation around AI bottlenecks has centered on chips, and semiconductor production in the US is up 77% since 2019. According to the analysis, the constraint may be shifting from sophisticated hardware to the decidedly unglamorous metal boxes bolted to utility poles and concrete pads.

The 87% utilization figure also matters for what comes next. Plants running that close to capacity have little room to absorb a further jump in orders. If AI-driven demand keeps rising, the options are new capacity, more imports, or higher prices. New capacity is the only one of those that addresses the underlying shrinkage. Imports have already climbed approximately 80% above 2019 levels, and prices have already risen 69%. The remaining lever is building more factories, which is precisely what the sector has been doing less of since 2019.