Many Believe The AI Bubble Will Burst, Effecting Electric Utilities
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Many Believe The AI Bubble Will Burst, Effecting Electric Utilities
"The data center-utility romance may be in for a period of adjustment, if history repeats itself. The writing about artificial intelligence talks increasingly about the AI bubble and speculates on how and when it will burst. If this happens, there will be consequences for the whole economy and specific consequences for electric utilities, which have responded to growth in data centers with big investments in new generation and upgraded infrastructure."
"About $1.5 trillion will be invested worldwide on AI this year, and this will rise to $4 trillion over the next several years, according to widely published calculations. The Wall Street Journal points out that while the big tech companies have invested mightily in AI infrastructure, they have been joined by many lesser companies, which are mostly debt-financed, and this increases the chances of a shakeout. It is also akin to the dot-com bubble of the 1990s, when debt-financed dreams overwhelmed financial reality."
Rapid AI investment growth is driving massive spending on infrastructure and data centers worldwide. Forecasts anticipate $1.5 trillion invested this year and up to $4 trillion in following years. Major technology companies led initial infrastructure buildouts, and many smaller, often debt-financed firms have followed. These smaller entrants raise the risk of a market shakeout similar to the dot-com bubble, since revenues remain limited while expenditures are large. Electric utilities have responded by adding generation and upgrading grid infrastructure to serve data center demand. A sharp correction in AI investment could strain utilities and leave overbuilt capacity and financial losses.
Read at Forbes
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