Redwood Materials, a company founded by former Tesla CTO JB Straubel, is witnessing unprecedented growth in its energy storage business, fueled by the increasing demand for energy solutions in AI data centers. Over the past year, this division has rapidly developed into the fastest-growing segment of the battery recycling and materials startup, reflecting a broader trend resulting from the AI data center boom.

To accommodate this growth, the company has expanded its research and development lab in San Francisco, now occupying a substantial 55,000 square feet and employing close to 100 individuals. While these numbers represent a small fraction of Redwood’s overall workforce of 1,200, they underscore the significance of energy storage in the company’s future. The energy storage unit, launched in June 2025, is pivotal for powering data centers, AI computing, and various industrial applications.

In a blog post, Redwood announced that the expansion would cater to an anticipated surge in energy storage deployments, driven mainly by the demands of AI data centers. Recently, the company secured $425 million in a Series E funding round, which will bolster its growth. Notably, tech giants like Google and longstanding supporter Nvidia participated in this round, reflecting the commercial significance of Redwood’s energy storage initiatives.

According to Claire McConnell, Redwood’s vice president of business development, the energy storage systems are designed not only to cater to data centers but also to support renewable projects, including solar and wind energy. As the AI landscape evolves, the requirements for reliable and scalable electricity solutions are in flux.

Data centers have been a staple of the tech infrastructure for decades. However, the rapid advancements in AI are triggering a significant uptick in data center construction and, consequently, an urgent need for dependable energy supplies. McConnell emphasized this point, noting that data center developers are currently facing unprecedented challenges in connecting to the electrical grid. Often, they are met with timelines that could extend up to five years, all while navigating a landscape of immense competition in the AI sector.

This predicament highlights the crucial role of energy storage solutions. With the increasing pressure to build more data centers rapidly, there is a pressing need for innovative energy management strategies. Redwood’s approach aims to disrupt traditional models by providing scalable energy storage systems that align with both immediate and future requirements of the industry.

Founded in 2017 to address the challenges of battery lifecycle sustainability, Redwood Materials initially focused on creating a circular supply chain for batteries. The pivot to energy storage systems marks a strategic expansion of their technology and services offered. The company aims to leverage its experience in battery recycling to enhance energy storage solutions, positioning itself as a key player in the renewable energy landscape.

With funding and technological advancements driving this transformation, Redwood’s growth trajectory reflects not just its capabilities but also highlights the larger shifts within technology and energy sectors. As AI continues to pervade industries, companies like Redwood are set to play a crucial role in ensuring the sustainability and reliability of energy supplies critical to this digital age.

In conclusion, Redwood’s rapid expansion in the energy storage sector showcases the vital intersection of AI demand and energy needs. This emerging framework underscores a significant evolution in how technology businesses operate and adapt to the pressing requirements of a fast-changing landscape. The impact of these developments will be felt widely across the energy sector, marking a pivotal moment for innovation and investment in energy solutions that meet the challenges posed by next-generation AI technology.