Groq Investor Sounds Alarm On Data Centers (axios.com) 13
Axios reports that venture capitalist Alex Davis is warning that a speculative rush to build data centers without committed tenants could trigger a financing crunch by 2027-2028.
"This critique is coming from inside the AI optimist camp," notes Axios, as Davis' firm, Disruptive, "recently led a large investment in AI chipmaker Groq, which then signed a $20 billion licensing deal with Nvidia. It's also backed such unicorn startups as Reflection AI, Shield AI and Gecko Robotics."
Here's what Davis had to say in his investor letter this morning: "While I continue to believe the ongoing advancements in AI technology present 'once in a lifetime' investment opportunities, I also continue to see risks and reason for caution and investment discipline. For example, we are seeing way too many business models (and valuation levels) with no realistic margin expansion story, extreme capex spend, lack of enterprise customer traction, or overdependence on 'round-trip' investments -- in some cases all with the same company. I am also deeply concerned about the 'speculative' data center market. The 'build it and they will come' strategy is a trap. If you are a hyperscaler, you will own your own data centers. We foresee a significant financing crisis in 2027-2028 for speculative landlords. We want to back theowner/users, not the speculative landlords, and we are quite concerned for their stress on the system." The full letter can be found here.
"This critique is coming from inside the AI optimist camp," notes Axios, as Davis' firm, Disruptive, "recently led a large investment in AI chipmaker Groq, which then signed a $20 billion licensing deal with Nvidia. It's also backed such unicorn startups as Reflection AI, Shield AI and Gecko Robotics."
Here's what Davis had to say in his investor letter this morning: "While I continue to believe the ongoing advancements in AI technology present 'once in a lifetime' investment opportunities, I also continue to see risks and reason for caution and investment discipline. For example, we are seeing way too many business models (and valuation levels) with no realistic margin expansion story, extreme capex spend, lack of enterprise customer traction, or overdependence on 'round-trip' investments -- in some cases all with the same company. I am also deeply concerned about the 'speculative' data center market. The 'build it and they will come' strategy is a trap. If you are a hyperscaler, you will own your own data centers. We foresee a significant financing crisis in 2027-2028 for speculative landlords. We want to back theowner/users, not the speculative landlords, and we are quite concerned for their stress on the system." The full letter can be found here.
Well thought out letter (Score:1)
The only problem is the thing he is scared of is not the danger, the thing he is excited for is not the profit.
Data centers are a good investment - whether or not AI ends up being valuable. The explosive growth of the tech industry existed before AI and will exist afterwards. If Crypto is still a thing, they can use them. If not, someone will try to make a pure AI Hollywood movie and use them. Or someone will find some other new and innovative use for them.
AI is a million dollar solution looking for a
Re: (Score:3)
The only problem is the thing he is scared of is not the danger, the thing he is excited for is not the profit.
Data centers are a good investment - whether or not AI ends up being valuable. The explosive growth of the tech industry existed before AI and will exist afterwards. If Crypto is still a thing, they can use them.
My electrical costs going up another 300% is not exactly a justified reason for "still a thing" infrastructure mining the last remnants of shitcoin driven purely by mathematical difficulty and delusional speculative value enhanced by being the largest money laundering network in the known universe.
AI is a million dollar solution looking for a trillion dollar problem. Sure it is helpful but millions, not trillions.
AI is a multi-trillion dollar potential solution looking to destroy a billion or two human jobs with no viable replacement thanks to blind greed. Helpful to a few hundred multi-trillionaires in the end, but at th
First to default worry (Score:2)
The financial elites are worried that they will be the backer, funder, seller or underwriter of the first major AI related debt bond to default and will be in the same perpetual boat as "Lehman Brothers defaulted starting the 2008 financial crisis".
The end is near (Score:2)
Come on now... (Score:2)
All these AI data centers that are being built now will eventually be converted into pool and spa showrooms in the next decade. /s
Like I said (Score:4, Insightful)
Re: (Score:2)
Indeed. People do not learn. Always the same crap.
Re: (Score:2)
Its 1997-2001 again. Dotcom bubble 2 electric boogaloo
At least in the late 90s, there was a lot of dark fiber built that eventually got used. This time, we're talking about massive energy and water infrastructure projects along with the data centers. When those parent companies eventually go bankrupt, those infrastructure projects will probably be useless - and it is likely that the other customers of those utilities will bear the cost.
Far too many investors assume... (Score:2)
...that scaling will always be necessary to advance AI.
One clever algorithm changes everything
Data centers in space (Score:2)
Nothing says bubble more than that.