President Trump signed an executive order last week declaring a national emergency over foreign-made equipment used in America’s bulk-power system, giving the Department of Energy new authority to block or restrict transactions involving equipment that runs the nation’s electric grid and data centers.
The order calls the situation an “extraordinary foreign threat,” a designation that clears the way for federal action against equipment sourced from adversarial nations, chief among them China.
Trump tied the move directly to the explosive growth of artificial intelligence. “Since my first term, the threat to the United States regarding foreign supply of bulk-power system electric equipment has become even more acute,” he said. “The rapid growth of advanced manufacturing, data centers, artificial intelligence, and defense production has increased the Nation’s dependence on abundant, reliable electricity and magnified the consequences of a successful attack or supply disruption on the bulk-power system.”
The order builds on an April Presidential Determination in which Trump identified transformers, transmission lines and conductors, substations, high-voltage circuit breakers and power control electronics as “essential to the national defense.”
How Deep the Dependence Runs
The numbers show why the White House is acting. Yury Dvorkin, an associate professor at Johns Hopkins University, said China’s grip is concentrated in the equipment that actually connects data centers to the grid. “The mid-term exposure is concentrated in grid connectors: transformers, switchgear, and batteries,” Dvorkin said. “China’s share of certain transformer and switchgear categories runs near 30%, and it accounts for over 40% of U.S. battery imports.”
Dvorkin said the exposure doesn’t stop there. “Our analysis shows that there is also a deeper exposure upstream: copper, electrical steel, and battery cathode materials,” he said.
Ben Boucher, senior analyst for supply chain at Wood Mackenzie, pointed to one component in particular that hyperscale data center operators rely on heavily. “There are a few key areas that the AI infrastructure buildout is increasingly dependent on Chinese imports,” he said. “The most notable ones include substation transformers, which hyperscalers typically have on site to step transmission voltage down.”
Laveena Iyer, a senior analyst at The Economist Group, said the government’s focus has shifted noticeably in recent months. “Scrutiny over China’s presence in the U.S. data centre power stack has only risen over the past eight months or so, this is a shift from the previous focus that centred solely on the compute stack,” she told CNBC.
China’s Foothold Extends to the Optical Layer
The exposure isn’t limited to transformers and batteries. Zhongji Innolight and Eoptolink, both Chinese firms, lead the world in data center optical transceiver revenue. Together, Chinese companies control roughly two-thirds of global optical transceiver unit supply, according to an August report from Counterpoint analyst Neil Shah.
American firms Lumentum and Coherent compete directly with those Chinese suppliers and stand to gain if Washington restricts their rivals’ access to the U.S. market. Nvidia has already placed a $2 billion bet on each company, investing that amount in both Lumentum and Coherent in March.
Domestic Manufacturers Are Already Moving
Some companies aren’t waiting for Washington to act. Hitachi Energy announced a $1 billion investment in September 2025 to expand critical grid manufacturing capacity inside the United States, including $457 million earmarked for a new large power transformer facility. Siemens Energy followed in February with its own $1 billion commitment to build U.S. production of grid and gas turbine equipment for AI infrastructure and data centers.
Those investments suggest industry is already reading the writing on the wall: the era of cheap, unrestricted Chinese hardware powering America’s AI buildout may be closing, and the administration intends to speed that process along.
