AI Boom Fuels Frenzied Data Centre Investment, Echoing Dot-Com Era Risks
Prague – A surge of capital is flooding the data center market as companies race to support the escalating demands of artificial intelligence, mirroring the speculative investment patterns seen during the dot-com bubble, experts warn. while the long-term benefits of AI remain uncertain, massive investments are being made in infrastructure with no guarantee of future returns, raising concerns of a potential market correction.
The current AI boom is reminiscent of the early 2000s, when capital expenditures outpaced investor confidence, leading to irrational vendor behavior, according to Kupperman. “Vendors began acting irrationally to meet Wall Street’s goals. Lucent and Nortel began lending money to their customers to buy network equipment,acquired stakes in their companies so they could buy more equipment,and even bought capacity in their customers’ fiber networks so they could show revenue growth and meet Wall Street’s goals,” he describes. Today, OpenAI, a leading AI developer, has yet to generate revenue and is currently reliant on investor funding, a pattern shared by numerous other AI companies.
Despite the potential for technological advancement,experts caution that innovation doesn’t automatically translate to investor profits. “Part of the investment will end up as a loss if projects based purely on AI hype do not find a lasting business model. We will then see corrections on the capital markets, and the question is not if, but when and how hard they will be,” says Svátek.
However, even if the current AI boom falters, lasting infrastructure may remain, similar to the fiber optic networks laid during the tech bubble or the railways built in the 19th century. “The tech bubble left fiber in the ground, and AI may leave data centers if the current boom turns out to be overdone,” the analysis notes.
The competitive landscape is further intensified by the ambitions of major technology companies. “The big technology players are striving for a dominant position at any cost.We are literally witnessing an AI arms race,” Pfeiler observes. Early signs of investor caution are emerging, with Bain Capital reportedly beginning to avoid investments in data centers as the appetite for funding unprofitable ventures wanes.
