"Alphabet Inc. ( NASDAQ: GOOGL) CEO Sundar Pichai told the BBC that no company in the sector is immune if the artificial intelligence (AI) bubble bursts. He admitted there are "elements of irrationality." The statement harkens back to descriptions of the dot-com bubble, which knocked out hundreds of companies in 2000 and 2001. Pichai acknowledged several short-term problems as the industry goes forward."
"High on that list is access to energy. In almost all cases, this is electricity. Pichai is not saying anything new. By some counts, total commitments to AI data centers across the global industry are nearing $3 trillion. There is no sign that has started to level off. In the United States, the energy problem is acute. It can take years to build an AI server farm."
"It is up 49%, against the broader market's 13% increase. Granted, its core search business and YouTube have put up record numbers. Yet, investors are more interested in Alphabet's AI success than its powerful legacy operations. Like other mega-tech companies, Alphabet has tens of billions of dollars on its balance sheet. Alphabet needs partnerships and outside funding, which represents a risk all of its own."
No company in the AI sector is immune to a potential bubble burst, and elements of irrationality are present. Access to energy, primarily electricity, is a critical short-term constraint as global commitments to AI data centers approach $3 trillion and show no sign of leveling off. In the United States the energy bottleneck is acute because AI server farms can take years to build. Utilities and financial firms are entering the market and share deployment risks if AI revenues fail to materialize. Alphabet's stock has risen sharply this year as investors prioritize AI prospects, yet massive cash reserves may still be insufficient without partnerships and external funding.
Read at 24/7 Wall St.
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