Boom or bubble? Inside the $3tn AI datacentre spending spree

The world is experiencing a massive investment boom in data centers, projected to reach $3 trillion, primarily driven by the insatiable demand for artificial intelligence. These facilities are crucial for training and operating AI tools, leading to soaring valuations for tech companies involved in AI development and infrastructure. While this surge in investment fuels optimism and creates jobs in host communities like Newport, Wales, concerns linger about the sustainability of this spending spree and the potential for a bubble. Major tech giants such as Amazon, Meta, and Microsoft are significantly increasing their capital expenditure on AI-related hardware, including data centers and the chips within them. This aggressive expansion is prompting significant financial commitments, with individual projects costing hundreds of millions of dollars and companies like Equinix planning substantial investments. However, some industry figures, like Alibaba's chairman, have voiced concerns about potential market excess, citing projects seeking funding without guaranteed customer commitments. A significant portion of the projected $3 trillion in data center spending is expected to be funded through private credit markets, as traditional cash flow from hyperscale tech companies may not cover the entire gap. This reliance on private credit raises questions about risk assessment, as lenders may be eager to deploy capital into the burgeoning AI sector without fully evaluating the potential risks of investing in rapidly depreciating assets. Experts warn that a substantial influx of debt capital into this unproven category could pose structural risks to the global economy. Despite lofty rev... download the app to read more