A massive disconnect is emerging in the AI industry. On one side, a projected $3 trillion is being poured into building datacenters. On the other, a recent MIT study found that 95% of organizations are getting zero return from their investments in generative AI pilots. This has ignited fierce debate about whether the spending spree is a sustainable boom or a colossal bubble.
The spending is “nothing short of incredible.” “Hyperscalers” like Meta, Google, and Microsoft are spending $750bn, fueling record valuations. Nvidia is worth $5tn, Microsoft $4tn, and Google’s parent just had a $100bn quarter. This optimism is transforming towns like Newport, Wales, where a Microsoft datacenter is seen as the “economy of the future.”
But this spending is based on “lofty revenue expectations,” projecting the generative AI market to hit $1tn by 2028. The MIT data suggests this business adoption is not materializing. If businesses aren’t seeing returns, they won’t pay for the services, and the entire $3tn investment model collapses.
This is why warnings of a “bubble” are growing. Alibaba’s chair sees “signs of excess” in projects raising money without customers. The Uptime Institute, a datacenter rating firm, agrees, stating many announced projects are “speculative” and “will never be built.”
These speculative projects are being funded by a $1.5tn mountain of private credit. If the returns don’t appear, and the 95% of “zero return” pilots prove to be the norm, this debt-fueled house of cards could pose a “structural risk to the overall global economy.”