In the $3 trillion AI datacenter boom, there’s a “healthy” core and a “speculative” fringe. The “healthy” part is the “incredible” $750 billion spending spree being bankrolled by the “hyperscalers”—Amazon, Meta, Google, and Microsoft.
This $750bn, set to be spent over the next two years, is for “AI-related capital expenditure.” It’s being funded by massive cash flows. Google’s parent, Alphabet, just posted a $100bn quarter, driven by AI demand. These companies’ valuations are soaring, with Nvidia at $5tn and Microsoft at $4tn.
This “healthy” investment is also “general purpose.” As Microsoft’s Alistair Speirs points out, the new datacenter in Newport, Wales, isn’t “all-in on AI.” It’s a “general purpose technology” that can also “handle email traffic, storing company files and hosting Zoom calls.” This provides a safe floor for the investment.
This “healthy” boom is what is creating “generational employment opportunities” in communities like Newport. It’s building tangible assets like the “world’s most powerful AI datacentre” in Wisconsin and xAI’s “colossus.”
However, this “hyperscaler” arms race is also fueling the “exuberance” of the “speculative” market. It has inspired a $1.5tn “shadow” boom, funded by risky debt, that “could end up representing structural risk” to the economy. The “healthy” boom is real, but it’s inadvertently inflating a “bubble.”