{"id":90643,"date":"2025-11-04T18:00:00","date_gmt":"2025-11-04T15:00:00","guid":{"rendered":"https:\/\/forklog.com\/en\/?p=90643"},"modified":"2025-11-04T18:02:52","modified_gmt":"2025-11-04T15:02:52","slug":"bubble-or-not-how-energy-costs-are-working-against-ai-firms","status":"publish","type":"post","link":"https:\/\/forklog.com\/en\/bubble-or-not-how-energy-costs-are-working-against-ai-firms\/","title":{"rendered":"Bubble or not? How energy costs are working against AI firms"},"content":{"rendered":"

Current revenues at AI companies may not justify the vast cost of compute. So said HSBC CEO Georges Elhedery at the Global Investment Summit for financial leaders in Hong Kong, according to CNBC<\/a>.<\/p>\n

In July, Morgan Stanley analysts reported<\/a> that over the next five years global data-center capacity will increase sixfold, and by the end of 2028 the value of data centers and their equipment will reach $3 trillion.<\/p>\n

An April report<\/a> from McKinsey cites an even bigger figure: by 2030, meeting demand for AI infrastructure will require $5.2 trillion in capital expenditure. Spending on data centers serving traditional IT applications is forecast at $1.5 trillion.<\/p>\n

Consumers are not ready to pay for this, Elhedery said, and companies will be cautious because productivity gains will not materialise within a year or two.<\/p>\n

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“It looks like five-year trends, and so the growth means that we will start to see real benefits in the form of revenue and willingness to pay for this probably later than investors expect,” he said.<\/p>\n<\/blockquote>\n

General Atlantic chairman and CEO William Ford agreed:<\/p>\n

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“In the long term you will create a whole range of new industries and applications, and that will deliver benefits in the form of productivity gains, but it will take 10\u201320 years.”<\/p>\n<\/blockquote>\n

Big tech groups Alphabet, Meta, Microsoft and Amazon have lifted their capital-expenditure forecasts to $380 billion in 2025. OpenAI signed<\/a> a series of infrastructure agreements worth around $1 trillion.<\/p>\n

Ford noted that the huge spending pouring into the AI sector reflects an understanding of the technology\u2019s long-term impact. But you have to “pay up front for an opportunity that will emerge in the future.” In the early stages, there may be “misallocation of capital, overvaluation and irrational enthusiasm.”<\/p>\n

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“You are really betting that this will be a broad-based technology, more like railroads or electricity, which had a profound impact over time and changed the economy. But in the first few years it is very hard to predict exactly how,” the General Atlantic CEO concluded.<\/p>\n<\/blockquote>\n

A bubble\u2014or not?<\/h2>\n

Investors have lately been actively debating<\/a> whether markets are overvaluing artificial intelligence.<\/p>\n

Last week investor Ray Dalio said<\/a> his personal “bubble indicator” is at a relatively high level. At the same time, Fed<\/span> chair Jerome Powell described the AI boom as “different” from the dotcoms.<\/p>\n

Magnus Grimeland, founder of Singapore venture firm Antler, believes the industry is “definitely” not in a bubble. In his view, the pace at which neural networks are being adopted in business is faster than with other technological shifts such as moving from physical servers to cloud computing.<\/p>\n

Moreover, artificial intelligence is a “priority task” for opinion leaders, whether heads of medical institutions in India or American Fortune 500 companies.<\/p>\n

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“What distinguishes this situation from a bubble and makes it entirely different from the dotcoms is that most of the growth is backed by real revenues,” Grimeland said.<\/p>\n<\/blockquote>\n

Another difference between the popularity of AI and the dotcom boom is the speed of consumer adoption.<\/p>\n

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“Think how quickly our behaviour on the internet changed, right? A year ago 100% of my searches [were in] Google. Now the figure is probably 20%,” Grimeland said.<\/p>\n<\/blockquote>\n

AI projects are increasingly integrating with familiar online systems. In October OpenAI unveiled<\/a> its Atlas browser with a built-in chatbot and AI assistants.<\/p>\n

OpenAI\u2019s big spend<\/h2>\n

OpenAI\u2019s annual revenue exceeds $13 billion, CEO Sam Altman said on the BG2 podcast. That is a big number, but it pales beside the $1 trillion the startup plans to spend on compute infrastructure over the next decade.<\/p>\n