[82lsju]

and then there is the question of when companies (other than Nvidia and TSMC) will actually make money from AI, of course this question does not seem to bother many people currently but it seems a lot like the dotcom bust or the overbuild of fibre optic infrastructure (ours to our home got lit up about two years ago after not having access to the service that was about 1/4 mile from out house along Foothill Expressway for ~25 years, originally laid by PacBell).

Artificial intelligence companies like OpenAI have been quick to unveil plans for spending hundreds of billions of dollars on data centers, but they have been slower to show how they will pull in revenue to cover all those expenses
...
Now, the consulting firm Bain & Co. is estimating the shortfall could be far larger than previously understood.

By 2030, AI companies will need $2 trillion in combined annual revenue to fund the computing power needed to meet projected demand, Bain said in its annual Global Technology Report released Tuesday. Yet their revenue is likely to fall $800 billion short of that mark as efforts to monetize services like ChatGPT trail the spending requirements for data centers and related infrastructure, Bain predicted.

The report is set to raise further questions about the AI industry’s valuations and business model. The increasing popularity of services such as OpenAI’s ChatGPT and Google’s Gemini, as well as AI efforts by companies across the planet, means demand for computing capacity and energy is rising at a rapid clip. But the savings provided by AI and companies’ ability to generate additional revenue from AI is lagging behind that pace.
...
OpenAI is losing billions of dollars a year and prioritizing growth over profit, but it does expect to be cash-flow positive by 2029, Bloomberg has reported. Bain didn’t go into the likely implications for AI companies if they continue to fall short of profitability into 2030.

The biggest tech firms including Microsoft Corp., Amazon.com Inc. and Meta Platforms Inc. will ramp up their combined annual spending on AI to more than $500 billion by early next decade, according to Bloomberg Intelligence. The release of new models from OpenAI and China’s DeepSeek, among other companies, is spurring demand for AI services and driving the entire industry to boost investment.

https://www.siliconvalley.com/2025/09/23...bain-says/

and

"However, a recent deep dive by Praetorian Capital CIO Harris Kupperman took a peek under the hood of present-day data centers — and for anyone pouring money into the space, his conclusions will be sobering.

"I’ve watched as AI went from an interesting parlor trick for making memes, to something that’s increasingly integrated into my daily workflow," Kupperman conceded. "I am not here to belittle AI, it’s the future, and I recognize that we’re just scratching the surface in terms of what it can do.

But "I also recognize massive capital misallocation when I see it," he continued. "I recognize an insanity bubble, and I recognize hubris."

To that end, Kupperman works out rough calculations for the genuine cost of a data center, factoring in the inevitable breakdown of parts over time.

Each data center, he says, is essentially made up of three components: the chips, which become obsolete in just a few years; the systems connecting the chips, which need to be replaced every decade or so; and the building itself, which should last for quite a while.

Add it all up, and time is not on the data center's side. The finance guru estimates that the "AI datacenters to be built in 2025 will suffer $40 billion of annual depreciation, while generating somewhere between $15 and $20 billion of revenue."

In other words, new data centers have a very tiny runway in which to achieve profits that currently remain way out of reach. By Kupperman's projections, a brand new data center will quickly become a Theseus' ship made up of some of the most expensive technology money can buy. If a new data center doesn't start raking in mountains of cash ASAP, the cost to maintain its aging parts will rapidly overtake the revenue it can bring in.

Given the current rate at which tech companies are spending money without much return — a long-term bet that AI will all but make human labor obsolete — Kupperman estimates that revenue would have to increase ten-fold just to break even. Anything's possible, of course, but it doesn't seem like a hot bet.

"I don’t see how there can ever be any return on investment given the current math," he wrote."

https://futurism.com/data-centers-financial-bubble

[82lsju]

and then there is the question of when companies (other than Nvidia and TSMC) will actually make money from AI, of course this question does not seem to bother many people currently but it seems a lot like the dotcom bust or the overbuild of fibre optic infrastructure (ours to our home got lit up about two years ago after not having access to the service that was about 1/4 mile from out house along Foothill Expressway for ~25 years, originally laid by PacBell).

Artificial intelligence companies like OpenAI have been quick to unveil plans for spending hundreds of billions of dollars on data centers, but they have been slower to show how they will pull in revenue to cover all those expenses
...
Now, the consulting firm Bain & Co. is estimating the shortfall could be far larger than previously understood.

By 2030, AI companies will need $2 trillion in combined annual revenue to fund the computing power needed to meet projected demand, Bain said in its annual Global Technology Report released Tuesday. Yet their revenue is likely to fall $800 billion short of that mark as efforts to monetize services like ChatGPT trail the spending requirements for data centers and related infrastructure, Bain predicted.

The report is set to raise further questions about the AI industry’s valuations and business model. The increasing popularity of services such as OpenAI’s ChatGPT and Google’s Gemini, as well as AI efforts by companies across the planet, means demand for computing capacity and energy is rising at a rapid clip. But the savings provided by AI and companies’ ability to generate additional revenue from AI is lagging behind that pace.
...
OpenAI is losing billions of dollars a year and prioritizing growth over profit, but it does expect to be cash-flow positive by 2029, Bloomberg has reported. Bain didn’t go into the likely implications for AI companies if they continue to fall short of profitability into 2030.

The biggest tech firms including Microsoft Corp., Amazon.com Inc. and Meta Platforms Inc. will ramp up their combined annual spending on AI to more than $500 billion by early next decade, according to Bloomberg Intelligence. The release of new models from OpenAI and China’s DeepSeek, among other companies, is spurring demand for AI services and driving the entire industry to boost investment.

https://www.siliconvalley.com/2025/09/23...bain-says/

and

"However, a recent deep dive by Praetorian Capital CIO Harris Kupperman took a peek under the hood of present-day data centers — and for anyone pouring money into the space, his conclusions will be sobering.

"I’ve watched as AI went from an interesting parlor trick for making memes, to something that’s increasingly integrated into my daily workflow," Kupperman conceded. "I am not here to belittle AI, it’s the future, and I recognize that we’re just scratching the surface in terms of what it can do.

But "I also recognize massive capital misallocation when I see it," he continued. "I recognize an insanity bubble, and I recognize hubris."

To that end, Kupperman works out rough calculations for the genuine cost of a data center, factoring in the inevitable breakdown of parts over time.

Each data center, he says, is essentially made up of three components: the chips, which become obsolete in just a few years; the systems connecting the chips, which need to be replaced every decade or so; and the building itself, which should last for quite a while.

Add it all up, and time is not on the data center's side. The finance guru estimates that the "AI datacenters to be built in 2025 will suffer $40 billion of annual depreciation, while generating somewhere between $15 and $20 billion of revenue."

In other words, new data centers have a very tiny runway in which to achieve profits that currently remain way out of reach. By Kupperman's projections, a brand new data center will quickly become a Theseus' ship made up of some of the most expensive technology money can buy. If a new data center doesn't start raking in mountains of cash ASAP, the cost to maintain its aging parts will rapidly overtake the revenue it can bring in.

Given the current rate at which tech companies are spending money without much return — a long-term bet that AI will all but make human labor obsolete — Kupperman estimates that revenue would have to increase ten-fold just to break even. Anything's possible, of course, but it doesn't seem like a hot bet.

"I don’t see how there can ever be any return on investment given the current math," he wrote."

https://futurism.com/data-centers-financial-bubble