8 ms·

The murky economics of the data-centre investment boom

162 points by 1vuio0pswjnm7 1y ago

rzk 1y ago
https://archive.is/5CY26 https://archive.is/5CY26
dgfitz 1y ago
Sure seems like a combination of TINA and massive amounts of hope.
jjcm 1y ago
It's a long-term gamble but a short-term win. In almost all scenarios, a setup with this incentive structure will lead to massive adoption. It's too tempting, and with most jobs / political positions being short term (<5yrs) ones, people optimize for their time in that timeframe, not longer. Boards will pursue stock buybacks (short term growth, long term may cause trouble if there's a downturn), banks will lend out subprime mortgages (hit your sales numbers in the short term, at the cost of long term risk), etc etc. This situation is no different. There's money flowing in and there's less red tape since everyone is being pressured to allow it. It might work out in the long term, it might not, but it will 100% benefit those who push it in the short term. People will get promoted for driving a new data center, politicians can promote more jobs being added, everybody wins... for now. The future economic aspect becomes irrelevant when the short term candy is sweet enough.
- jpster 1y ago
  IBGYBG. “I’ll be gone, you’ll be gone”. Infamous email sign-off associated with the run-up to the Great Financial Crisis. Used by Wall Streeters asking analysts to inflate credit ratings for undeserving securities, backed by risky mortgages.
bdbdkdksk 1y ago
Ed Zitron writes about this constantly: https://www.wheresyoured.at/the-case-against-generative-ai/ https://www.wheresyoured.at/the-case-against-generative-ai/ All of the big players - Nvidia, OpenAI, Oracle, Microsoft - are in insane circular financing agreements that would make Enron executives blush.
- neffy 1y ago
  Feedback loops. Always with the feedback loops.
- mclanett 1y ago
  Wow this is quite a rant. However Zitron seems to have forgotten that Google exists or makes TPUs. He mentions Google only 10 times in the entire article, always in a minor way.
  - prasadjoglekar 1y ago
    Any reason to believe Google's unit economics on AI are any different than the other players here? And Google is an advertising company. Mostly in search, and increasingly dependent on YouTube. Everything else is a net money loser, including Waymo, Gemini etc.
    - sidibe 1y ago
      Well there's no circular financing for one thing.
    - asa400 1y ago
      Almost doesn’t matter what Google’s short term unit economics on AI are as long as their shareholders and board are OK with it. Google makes money hand over fist and can afford it. Microsoft is fine, Oracle is fine, TSMC is fine. These other shops are leveraged to the hilt, so they’ll be in a world of hurt if people stop buying, financing, or investing.
      - wmf 1y ago
        Oracle is going to get screwed if they build a bunch of data centers and the customers (mostly OpenAI) all declare bankruptcy.
      - scarface_74 1y ago
        Oracle is not fine. They are borrowing money hoping to get paid back by money losing OpenAI propped up by VC funding. No business is going to run workloads on OCI outside of ones running Oracle. They a They are a way distance fourth in cloud. I’ve been working in cloud consulting for five years including the first three directly at AWS (Professional Services). No one worried about having talking points about competing against Oracle. Microsoft, Google and Amazon have both internal products that can benefit from inference and cloud hosting.
combyn8tor 1y ago
Meanwhile in Australia we have a "AI data centre" startup being valued at $1.9 billion and given $330 million to play with, having not built anything yet. It's co-founded by a guy that went to prison for insider trading. His wife is also an investor, who happens to be a prominent Australian influencer. The company previously focused on Bitcoin mining but have pivoted to the AI boom, claiming their cooling systems to be 60% better than competitors. Their first project will kick off soon in the Australian state of Tasmania, where there is nothing much more than sheep and tourists. https://www.smartcompany.com.au/startupsmart/firmus-raises-330-million-build-ai-factory-tasmania-1-9-billion-valuation/ https://www.smartcompany.com.au/startupsmart/firmus-raises-3...
- pkaye 1y ago
  Is there a lot of power generation in Tasmania? That is the main criteria for AI data centers from what I heard. Latency is less critical than cost of power.
  - matt_daemon 1y ago
    Plenty of power and it’s almost always renewable: https://explore.openelectricity.org.au/energy/tas1/?range=7d&interval=30m&view=discrete-time&group=Detailed&show=curtailment_wind https://explore.openelectricity.org.au/energy/tas1/?range=7d... There’s also plenty more there than sheep and tourists (and not really that many of those)
    - decimalenough 1y ago
      There's pretty national parks, convict history and some pretty tasty whiskeys and wines, but not a whole lot of reasons to build a data centre. The power argument isn't particularly compelling either, because it's much more sunny on the Australian mainland.
      - hn_throwaway_99 1y ago
        > The power argument isn't particularly compelling either, because it's much more sunny on the Australian mainland. But the vast majority of Tasmania's power is hydroelectric. Hydro is a much more desirable renewable than solar because it essentially is its own built in battery.
kelp6063 1y ago
Unless the AI industry can figure out how to be profitable soon (to which basically nobody has a clear path to profitability besides maybe ad revenue) it's hard to see this not blowing up in a year or two. The bills for all of this are going to come due eventually and the AI CEOs can only convince investors to keep letting them burn billions for so long.
- willis936 1y ago
  It's incredible how much money is being lit on fire without anyone having an answer to the question "how will you generate revenue". Meanwhile alternative energy discussions here are met with harsh criticisms of their bottom lines while they have some of the most firm demand of any industry. Society should be prudent with their investments, but only when it's used for R&D into essential stuff and not a bunch of toys for rich psychopaths?
  - SchemaLoad 1y ago
    Their only answer is "if we invent AGI and fire everyone, the profits will be limitless".
    - mrwh 1y ago
      And yet, imagine it's 100 million jobs, at 100K per job. That's 10 trillion dollars a year, well worth the investment! Except that it won't be 100K per job that AI companies will capture, it'll be 2K. So that's not 10 trillion dollars a year, it's 200 billion. Which is about what a big tech company makes in advertising already.
    - Ianjit 1y ago
      Zuck has made it clear this is a Pascal's Gamble: "If we end up misspending a couple of hundred billion dollars, I think that is going to be very unfortunate, obviously. But I actually think the risk is higher on the other side . If you build too slowly and superintelligence is possible in 3 years, but you built it out assuming it is possible in 5 years, then you are out of position on the most important technology." His assumption is that superinteligence is close, its just a question of whether it is 3 or 5 years!
mwkaufma 1y ago
>> Cheerleaders such as Sam Altman, OpenAI’s boss, argue that the risks of underbuilding are at least as serious as those of overbuilding, because of the long-term economic potential of generative AI. Pure hucksterism.
kgwgk 1y ago
https://www.bloomberg.com/news/articles/2025-10-07/oracle-sinks-on-report-its-cloud-margins-are-worse-than-expected https://www.bloomberg.com/news/articles/2025-10-07/oracle-si... Oracle Sinks on Report Its Cloud Margins Are Lower Than Expected Jeran Wittenstein October 7, 2025 at 6:06 PM GMT+2 Oracle Corp. shares tumbled after a report that the software maker’s profit margin in its cloud computing business is lower than many on Wall Street have been estimating. While Oracle generated roughly $900 million in revenue from the rental of servers powered by Nvidia Corp. chips during the three months ended in August, the company only managed about $125 million in gross profit, the Information reported, citing internal corporate documents.
- mNovak 1y ago
  * Oracle sinks 7%, after having jumped 36% earlier in September.
dnw 1y ago
I wonder how much of this round tripping is because there are only a few companies that have the demands and can meet those demands...
fragmede 1y ago
[flagged]
- tomhow 1y ago
  Please don't do this here. We detached this comment from https://news.ycombinator.com/item?id=45510207 https://news.ycombinator.com/item?id=45510207 and marked it off topic.
  - fragmede 1y ago
    Apologies. Thanks for your hard work keeping the site quality high!
  - fragmede 1y ago
    Also, this was remarkably hard to find. Might I suggest if the logged in user is looking over their own comments, eg me viewing https://news.ycombinator.com/threads?id=fragmede https://news.ycombinator.com/threads?id=fragmede, that a flagged dead comment with a moderator responding shouldn't be collapsed by default? If that's intentional then nevermind, but as I am truly grateful for this site and you and DanG's (and everyone else's) hard work, I want to point out that it was hard to find and wouldn't have come across it if I didn't have a program running that hits the Firebase API and notifies me on replies. Someone who didn't have such a program could easily miss mod responses.
neuroelectron 1y ago
Cloud has failed (by becoming more expensive then on prem) so they're buying up everything in a last ditch effort to centralize compute. Really silly since all those GPUs will be obsolete soon.
- ecshafer 1y ago
  Cloud was always going to be more expensive than on prem, that wasn't what was being sold. Cloud sells that they are able to give you high availability across multiple regions without having to do an expensive capital investment. Amazon/Microsoft/Google is selling the talented engineering for getting these data centers working around the world at a high level of availability to companies. Most companies like recurring costs compared to capital expenditures. Companies also prefer lower head counts and paying for services. It is BETTER from an MBA pov to pay Amazon to run a Data center since they are experts than for you to run a data center as a finance company.
  - solatic 1y ago
    > since they are experts This is the engineering perspective, not the finance perspective. As an engineer holding an MBA, I've made the argument countless times in BigCo to move from cloud deployments to on-prem. When you're a startup, you often simply don't have the cash on hand to make the capital expenditure to build out datacenter capacity, especially with an uncertain (but hopefully high) expected rate of growth. When you're a BigCo, the script flips; you have plenty of cash on hand and you want to improve overall profitability, which is done by using capital expenditures to reduce operating expenditures, i.e. funding datacenter build-outs to reduce cloud bills. > experts Companies can hire experts and can still out-source to colos if they prefer. This is a question of political will and risk analysis.
  - gregw2 1y ago
    > Most companies like recurring costs compared to capital expenditures. Actually big companies prefer capex to opex and cloud pushed them in the opposite direction of what they'd naturally prefer. But the other advantages you cite + hype overruled the liability of switching from onprem capex to opex.
danielodievich 1y ago
Last weekend we had dinner at a friend to celebrate their child's birthday. They work at OCI in a very senior position and were heading out next day to troubleshoot that exact datacenter in Abilene, TX next day, to presumably yell at various people about cabling and schedule and whatnot. They were not looking forward to it because a) TX and b) it's Abilene TX and c) the overall situation. We spoke quite a bit about this project, circular money and things and the impression I got is that OCI is just grabbing money while the perpetuum mobile is unrolling. I am looking forward to hearing how the trip went when I see them next.
- deleted 1y ago
  [deleted]
martinald 1y ago
Every time I read one of these articles the main issue I have is that it doesn't take into account the huge shortages of compute that are going on all the time. Anthropic and Google especially have been incredibly unreliable, struggling to keep up with demand. Each of the main providers could easily use 10x the compute tomorrow (albeit arguably inefficiently) by using more thinking for certain tasks. Now - does that scale to the 10s of GWs of deals OpenAI is doing? Probably not right now, but the bigger issue as the article does point out in fairness is the huge backlog of power availability worldwide. Finally, AI adoption outside of software engineering is incredibly limited at work. This is going to rapidly change. Even the Excel agent Microsoft has recently launched has the potential to result in hundred fold increases in token consumption per user. I'm also suspect of the AI sell through rate being an indicator that it's not popular for Microsoft. The later versions of M365 copilot (or whatever it is called today) are wildly better than the original ones. It all sort of reminds me of Apple's goal of getting 1% in cell phone market share, which seemed laughably ambitious at one point - a total stretch goal. Now they are up to 20% and smartphone penetration as a whole is probably close to 90% globally of those that have a phone. One potential wild card though for the whole market is someone figuring out a very efficient ASIC for inference (maybe with 1.58bit). GPUs are mostly overkill for inference and I would not be surprised if 10-100x efficiency gains could be had on very specialised chips.
- ivape 1y ago
  BlackRock just bought a data center for 40bn last week. BlackRock. The animals that bought all the housing once. They must be stupid I guess.
  - deleted 1y ago
    [deleted]
  - pgwhalen 1y ago
    BlackRock did not buy “a” data center, it bought a data center company with 78 data centers. I have no comment on whether or not it was a good deal, but your framing is silly.
- 1y ago
melbourne_mat 1y ago
The market can stay irrational longer than you can stay solvent.
nylonstrung 1y ago
How much of this capex is infrastructure that can support future generation of compute vs current-gen GPUs that will become obsolete?
- rwmj 1y ago
  I can't find the reference now unfortunately, but I read it was about 50:50, so half is the data center land / building / cooling / power generation, and half is in the GPUs themselves. This is notably very different from the dot-com build out of dark fibre, where digging the holes cost the vast majority of the money, and the fibres and network equipment cost very little in comparison.
pm90 1y ago
To summarize: * questionable demand for AI products make the DC investments risky (makes sense) * DCs being built in “remote” areas with cheap land may become obsolete/replaced by other DCs making use of said cheap land (questionable; DCs can upgrade cheaper than building a new one) * financing for DCs used to be from Big Tech but is now spread out among private equity, sovereign wealth funds etc increasing the exposure of the economy to failure of these investments (again, questionable, unless they are being financed by bank loans) The most salient concern seems to be a lack of demand. I don’t see why that would change in the future.

162 points by 1vuio0pswjnm7 1y ago

rzk 1y ago

https://archive.is/5CY26 https://archive.is/5CY26

dgfitz 1y ago

Sure seems like a combination of TINA and massive amounts of hope.

jjcm 1y ago

It's a long-term gamble but a short-term win. In almost all scenarios, a setup with this incentive structure will lead to massive adoption. It's too tempting, and with most jobs / political positions being short term (<5yrs) ones, people optimize for their time in that timeframe, not longer. Boards will pursue stock buybacks (short term growth, long term may cause trouble if there's a downturn), banks will lend out subprime mortgages (hit your sales numbers in the short term, at the cost of long term risk), etc etc. This situation is no different. There's money flowing in and there's less red tape since everyone is being pressured to allow it. It might work out in the long term, it might not, but it will 100% benefit those who push it in the short term. People will get promoted for driving a new data center, politicians can promote more jobs being added, everybody wins... for now. The future economic aspect becomes irrelevant when the short term candy is sweet enough.

jpster 1y ago
IBGYBG. “I’ll be gone, you’ll be gone”. Infamous email sign-off associated with the run-up to the Great Financial Crisis. Used by Wall Streeters asking analysts to inflate credit ratings for undeserving securities, backed by risky mortgages.

bdbdkdksk 1y ago

Ed Zitron writes about this constantly: https://www.wheresyoured.at/the-case-against-generative-ai/ https://www.wheresyoured.at/the-case-against-generative-ai/ All of the big players - Nvidia, OpenAI, Oracle, Microsoft - are in insane circular financing agreements that would make Enron executives blush.

neffy 1y ago
Feedback loops. Always with the feedback loops.
mclanett 1y ago
Wow this is quite a rant. However Zitron seems to have forgotten that Google exists or makes TPUs. He mentions Google only 10 times in the entire article, always in a minor way.
- prasadjoglekar 1y ago
  Any reason to believe Google's unit economics on AI are any different than the other players here? And Google is an advertising company. Mostly in search, and increasingly dependent on YouTube. Everything else is a net money loser, including Waymo, Gemini etc.
  - sidibe 1y ago
    Well there's no circular financing for one thing.
  - asa400 1y ago
    Almost doesn’t matter what Google’s short term unit economics on AI are as long as their shareholders and board are OK with it. Google makes money hand over fist and can afford it. Microsoft is fine, Oracle is fine, TSMC is fine. These other shops are leveraged to the hilt, so they’ll be in a world of hurt if people stop buying, financing, or investing.
    - wmf 1y ago
      Oracle is going to get screwed if they build a bunch of data centers and the customers (mostly OpenAI) all declare bankruptcy.
    - scarface_74 1y ago
      Oracle is not fine. They are borrowing money hoping to get paid back by money losing OpenAI propped up by VC funding. No business is going to run workloads on OCI outside of ones running Oracle. They a They are a way distance fourth in cloud. I’ve been working in cloud consulting for five years including the first three directly at AWS (Professional Services). No one worried about having talking points about competing against Oracle. Microsoft, Google and Amazon have both internal products that can benefit from inference and cloud hosting.

combyn8tor 1y ago

Meanwhile in Australia we have a "AI data centre" startup being valued at $1.9 billion and given $330 million to play with, having not built anything yet. It's co-founded by a guy that went to prison for insider trading. His wife is also an investor, who happens to be a prominent Australian influencer. The company previously focused on Bitcoin mining but have pivoted to the AI boom, claiming their cooling systems to be 60% better than competitors. Their first project will kick off soon in the Australian state of Tasmania, where there is nothing much more than sheep and tourists. https://www.smartcompany.com.au/startupsmart/firmus-raises-330-million-build-ai-factory-tasmania-1-9-billion-valuation/ https://www.smartcompany.com.au/startupsmart/firmus-raises-3...

pkaye 1y ago
Is there a lot of power generation in Tasmania? That is the main criteria for AI data centers from what I heard. Latency is less critical than cost of power.
- matt_daemon 1y ago
  Plenty of power and it’s almost always renewable: https://explore.openelectricity.org.au/energy/tas1/?range=7d&interval=30m&view=discrete-time&group=Detailed&show=curtailment_wind https://explore.openelectricity.org.au/energy/tas1/?range=7d... There’s also plenty more there than sheep and tourists (and not really that many of those)
  - decimalenough 1y ago
    There's pretty national parks, convict history and some pretty tasty whiskeys and wines, but not a whole lot of reasons to build a data centre. The power argument isn't particularly compelling either, because it's much more sunny on the Australian mainland.
    - hn_throwaway_99 1y ago
      > The power argument isn't particularly compelling either, because it's much more sunny on the Australian mainland. But the vast majority of Tasmania's power is hydroelectric. Hydro is a much more desirable renewable than solar because it essentially is its own built in battery.

kelp6063 1y ago

Unless the AI industry can figure out how to be profitable soon (to which basically nobody has a clear path to profitability besides maybe ad revenue) it's hard to see this not blowing up in a year or two. The bills for all of this are going to come due eventually and the AI CEOs can only convince investors to keep letting them burn billions for so long.

willis936 1y ago
It's incredible how much money is being lit on fire without anyone having an answer to the question "how will you generate revenue". Meanwhile alternative energy discussions here are met with harsh criticisms of their bottom lines while they have some of the most firm demand of any industry. Society should be prudent with their investments, but only when it's used for R&D into essential stuff and not a bunch of toys for rich psychopaths?
- SchemaLoad 1y ago
  Their only answer is "if we invent AGI and fire everyone, the profits will be limitless".
  - mrwh 1y ago
    And yet, imagine it's 100 million jobs, at 100K per job. That's 10 trillion dollars a year, well worth the investment! Except that it won't be 100K per job that AI companies will capture, it'll be 2K. So that's not 10 trillion dollars a year, it's 200 billion. Which is about what a big tech company makes in advertising already.
  - Ianjit 1y ago
    Zuck has made it clear this is a Pascal's Gamble: "If we end up misspending a couple of hundred billion dollars, I think that is going to be very unfortunate, obviously. But I actually think the risk is higher on the other side . If you build too slowly and superintelligence is possible in 3 years, but you built it out assuming it is possible in 5 years, then you are out of position on the most important technology." His assumption is that superinteligence is close, its just a question of whether it is 3 or 5 years!

mwkaufma 1y ago

>> Cheerleaders such as Sam Altman, OpenAI’s boss, argue that the risks of underbuilding are at least as serious as those of overbuilding, because of the long-term economic potential of generative AI. Pure hucksterism.

kgwgk 1y ago

https://www.bloomberg.com/news/articles/2025-10-07/oracle-sinks-on-report-its-cloud-margins-are-worse-than-expected https://www.bloomberg.com/news/articles/2025-10-07/oracle-si... Oracle Sinks on Report Its Cloud Margins Are Lower Than Expected Jeran Wittenstein October 7, 2025 at 6:06 PM GMT+2 Oracle Corp. shares tumbled after a report that the software maker’s profit margin in its cloud computing business is lower than many on Wall Street have been estimating. While Oracle generated roughly $900 million in revenue from the rental of servers powered by Nvidia Corp. chips during the three months ended in August, the company only managed about $125 million in gross profit, the Information reported, citing internal corporate documents.

mNovak 1y ago
* Oracle sinks 7%, after having jumped 36% earlier in September.

dnw 1y ago

I wonder how much of this round tripping is because there are only a few companies that have the demands and can meet those demands...

fragmede 1y ago

[flagged]

tomhow 1y ago
Please don't do this here. We detached this comment from https://news.ycombinator.com/item?id=45510207 https://news.ycombinator.com/item?id=45510207 and marked it off topic.
- fragmede 1y ago
  Apologies. Thanks for your hard work keeping the site quality high!
- fragmede 1y ago
  Also, this was remarkably hard to find. Might I suggest if the logged in user is looking over their own comments, eg me viewing https://news.ycombinator.com/threads?id=fragmede https://news.ycombinator.com/threads?id=fragmede, that a flagged dead comment with a moderator responding shouldn't be collapsed by default? If that's intentional then nevermind, but as I am truly grateful for this site and you and DanG's (and everyone else's) hard work, I want to point out that it was hard to find and wouldn't have come across it if I didn't have a program running that hits the Firebase API and notifies me on replies. Someone who didn't have such a program could easily miss mod responses.

neuroelectron 1y ago

Cloud has failed (by becoming more expensive then on prem) so they're buying up everything in a last ditch effort to centralize compute. Really silly since all those GPUs will be obsolete soon.

ecshafer 1y ago
Cloud was always going to be more expensive than on prem, that wasn't what was being sold. Cloud sells that they are able to give you high availability across multiple regions without having to do an expensive capital investment. Amazon/Microsoft/Google is selling the talented engineering for getting these data centers working around the world at a high level of availability to companies. Most companies like recurring costs compared to capital expenditures. Companies also prefer lower head counts and paying for services. It is BETTER from an MBA pov to pay Amazon to run a Data center since they are experts than for you to run a data center as a finance company.
- solatic 1y ago
  > since they are experts This is the engineering perspective, not the finance perspective. As an engineer holding an MBA, I've made the argument countless times in BigCo to move from cloud deployments to on-prem. When you're a startup, you often simply don't have the cash on hand to make the capital expenditure to build out datacenter capacity, especially with an uncertain (but hopefully high) expected rate of growth. When you're a BigCo, the script flips; you have plenty of cash on hand and you want to improve overall profitability, which is done by using capital expenditures to reduce operating expenditures, i.e. funding datacenter build-outs to reduce cloud bills. > experts Companies can hire experts and can still out-source to colos if they prefer. This is a question of political will and risk analysis.
- gregw2 1y ago
  > Most companies like recurring costs compared to capital expenditures. Actually big companies prefer capex to opex and cloud pushed them in the opposite direction of what they'd naturally prefer. But the other advantages you cite + hype overruled the liability of switching from onprem capex to opex.

danielodievich 1y ago

Last weekend we had dinner at a friend to celebrate their child's birthday. They work at OCI in a very senior position and were heading out next day to troubleshoot that exact datacenter in Abilene, TX next day, to presumably yell at various people about cabling and schedule and whatnot. They were not looking forward to it because a) TX and b) it's Abilene TX and c) the overall situation. We spoke quite a bit about this project, circular money and things and the impression I got is that OCI is just grabbing money while the perpetuum mobile is unrolling. I am looking forward to hearing how the trip went when I see them next.

deleted 1y ago
[deleted]

martinald 1y ago

Every time I read one of these articles the main issue I have is that it doesn't take into account the huge shortages of compute that are going on all the time. Anthropic and Google especially have been incredibly unreliable, struggling to keep up with demand. Each of the main providers could easily use 10x the compute tomorrow (albeit arguably inefficiently) by using more thinking for certain tasks. Now - does that scale to the 10s of GWs of deals OpenAI is doing? Probably not right now, but the bigger issue as the article does point out in fairness is the huge backlog of power availability worldwide. Finally, AI adoption outside of software engineering is incredibly limited at work. This is going to rapidly change. Even the Excel agent Microsoft has recently launched has the potential to result in hundred fold increases in token consumption per user. I'm also suspect of the AI sell through rate being an indicator that it's not popular for Microsoft. The later versions of M365 copilot (or whatever it is called today) are wildly better than the original ones. It all sort of reminds me of Apple's goal of getting 1% in cell phone market share, which seemed laughably ambitious at one point - a total stretch goal. Now they are up to 20% and smartphone penetration as a whole is probably close to 90% globally of those that have a phone. One potential wild card though for the whole market is someone figuring out a very efficient ASIC for inference (maybe with 1.58bit). GPUs are mostly overkill for inference and I would not be surprised if 10-100x efficiency gains could be had on very specialised chips.

ivape 1y ago
BlackRock just bought a data center for 40bn last week. BlackRock. The animals that bought all the housing once. They must be stupid I guess.
- deleted 1y ago
  [deleted]
- pgwhalen 1y ago
  BlackRock did not buy “a” data center, it bought a data center company with 78 data centers. I have no comment on whether or not it was a good deal, but your framing is silly.
1y ago

melbourne_mat 1y ago

The market can stay irrational longer than you can stay solvent.

nylonstrung 1y ago

How much of this capex is infrastructure that can support future generation of compute vs current-gen GPUs that will become obsolete?

rwmj 1y ago
I can't find the reference now unfortunately, but I read it was about 50:50, so half is the data center land / building / cooling / power generation, and half is in the GPUs themselves. This is notably very different from the dot-com build out of dark fibre, where digging the holes cost the vast majority of the money, and the fibres and network equipment cost very little in comparison.

pm90 1y ago

To summarize: * questionable demand for AI products make the DC investments risky (makes sense) * DCs being built in “remote” areas with cheap land may become obsolete/replaced by other DCs making use of said cheap land (questionable; DCs can upgrade cheaper than building a new one) * financing for DCs used to be from Big Tech but is now spread out among private equity, sovereign wealth funds etc increasing the exposure of the economy to failure of these investments (again, questionable, unless they are being financed by bank loans) The most salient concern seems to be a lack of demand. I don’t see why that would change in the future.