A bubble is forming amid the scramble to build data centers to power the AI boom, Alibaba’s chairman said.
“I start to get worried when people are building data centers on spec,” he said.
AI “hyperscalers” have been racing to build data centers as they predict demand for AI tools to soar.
The artificial intelligence build-out is starting to raise questions even from those competing in the space.
Alibaba Chairman Joe Tsai cautioned that so-called hyperscalers — companies with big AI ambitions like Meta Platforms and Microsoft — are rushing to construct data centers that might not be justified by future demand.
“I start to see the beginning of some kind of bubble,” he said Tuesday at the HSBC Global Investment Summit, Bloomberg reported.
In the US, dominant tech firms such as Microsoft, Amazon, Google, and Meta have spent billions on the infrastructure underpinning emerging AI tech. The four companies are expected to spend $320 billion in capital expenditures this year to broaden their AI capabilities.
The rush to build new data centers is also happening internationally, with investment funds and AI rivals pouring capital into the needed real estate and hardware.
Alibaba, a popular Chinese e-commerce site that has jumped into AI development, will invest over $52 billion over the next three years, Bloomberg reported.
But the data center buildout is becoming indiscriminate, Tsai said, with companies seemingly developing the sites with hopes of future success. Some projects are occurring without “uptake” agreements.
“I start to get worried when people are building data centers on spec.”
The numbers, at least those pushed by US firms, are also astounding to Tsai, who questioned the need for such spending.
“People are talking, literally talking about $500 billion, several 100 billion dollars. I don’t think that’s entirely necessary,” he said. “I think in a way, people are investing ahead of the demand that they’re seeing today, but they are projecting much bigger demand.”
US investors may be starting to share Tsai’s cynicism. While massive spending by US Big Tech firms has been a point of strength in previous years, the need for such enormous capex has come under fire as cheaper AI models have emerged from China. Waning enthusiasm for AI has helped trigger a sell-off in stocks such as Nvidia.
Read the original article on Business Insider
