The global AI investment spree has hit a “remarkable” $3 trillion projection for datacenter spending, but this “exuberance” is being financed by risky debt, leading some to warn of a bubble that “will backfire.”
While tech giants like Nvidia ($5tn) and Microsoft ($4tn) post record valuations, a $1.5tn “funding gap” in the datacenter build-out is being plugged by “private credit.” This “shadow banking” sector has “raised the alarm” at the Bank of England.
Analysts warn that lenders, “eager to deploy capital into AI,” are financing “speculative assets” and “unproven” projects “without their own customers.” Gil Luria of DA Davidson cautions this “influx of debt capital… could end up representing structural risk to the overall global economy.”
This “debt-fueled exuberance” is happening despite data showing a lack of real-world returns. An MIT study found 95% of organizations are getting zero return on generative AI pilots. This undermines the “lofty revenue expectations” that the market will hit $1tn by 2028.
Even industry watchdogs are skeptical. The Uptime Institute stated “many” of the datacenters announced “with a fanfare” are “speculative” and “will never be built.” The $3tn boom is real, but many worry its foundations are built on “speculative” debt rather than sustainable profits.