Beware of AI
I asked AI the question of profitability and over-promoting data center building: I agree with the assessment. Daily Herald should be doing a deep dive so your readers know the risks.
The data center boom is a classic infrastructure bubble — real assets being built, real money being spent, real value being created for some players. But the eventual owners of the facilities (whether hyperscalers or REIT investors) are making a bet that AI revenue will eventually justify the apex.
If that bet is wrong, the winners will be:
- NVIDIA shareholders (already paid)
- Construction firms (already paid)
- Utility investors (guaranteed returns via rate base)
- Local politicians (moved on to their next office by then)
- Investment bankers (fees already booked)
The bag-holders will be:
- Ratepayers stuck with overbuilt grid infrastructure
- Municipalities with tax-abated empty buildings
- REIT investors who bought at peak hype
- Late-stage debt holders
The true value of a data center is the computation it performs that someone actually pays for. Right now, most of the money being made is in building them, not operating them. And that's a dynamic that should look very familiar to anyone who watched the fiber optic bubble of 1999-2001.
The stockbrokers hyping value? They're not wrong that data centers could be worth trillions in aggregate. They're just conveniently omitting that most of that value has already been extracted by the people selling the shovels, not the ones digging for gold.
Thomas Braun, Mount Prospect