Forgot your password?
Close
typodupeerror
AI Businesses

Just How Big is the AI Buildout - and How Risky? (usnews.com) 90

Posted by EditorDavid from the on-the-bubble dept.
A new Brookings Institution study notes the "strikingly physical" economic footprint of AI's buildout, from specialized chips and electricity to purpose-built data centers. (Two-thirds of a data center's costs are IT equipment, with one-third going to real estate and its associated power infrastructure.) "At an average of 3.63 percent of GDP per year, the projected buildout would be larger relative to the economy than the major U.S. canal, railroad, electrification, highway, and telecommunications investment booms."

This is pushing up prices for workers, electricity, and even commercial real estate (as well as consumer products that use chips), notes the Wall Street Journal, and reducing the construction on new houses and apartment buildings. And in addition, the paper points out, projections for this buildout "would double the electricity consumption of the entire U.S. residential sector."

The calculations come from Columbia Business School finance/real estate professor Stijn van Nieuwerburgh — and Reuters explains their significance: Just as the rail and telecoms expansions led to notable bubbles and busts, Van Nieuwerburgh wrote that the extent of the buildout, the still-untested revenue streams, and the intricate financing structure emerging around AI mean it could be primed for a fall. "This is freaking complicated," he said in a briefing with reporters of the arrangements emerging between AI firms, major tech hyperscalers, banks, private credit lenders, real estate firms, and a host of other players involved in building what he conservatively estimated at 183 gigawatts worth of new data-center capacity over the next seven years, compared with about 57 gigawatts currently installed.... The investment underway already has outstripped what the major players can fund from their own cash flows. The shift to outside financing has increased leverage, redistributed risks across the economy, and made the venture dependent on revenue streams that have yet to be proven, Van Nieuwerburgh noted in the paper, which will be presented on Friday...

"These developments do not imply that financial distress is imminent. Strong growth in AI applications, high utilization, and continued improvements in model capability could support the projected infrastructure and generate stable cash flows," he wrote. "But the combination of uncertain demand, rapid technological change, execution bottlenecks, and high leverage creates meaningful downside risk if expectations are revised." As an example, he wrote that the AI industry will need to be earning about $3.7 trillion in annual revenue by 2032 to achieve the expected return on the investment, and "given current estimates of annual combined revenues of OpenAI and Anthropic of around $100 billion, revenues would need to grow at roughly 80% per year."
The paper suggests policies that "improve measurement and transparency" for financing.

Just How Big is the AI Buildout - and How Risky? More | Reply

Just How Big is the AI Buildout - and How Risky?

Comments Filter:

  • Bankers are vultures (Score:5, Insightful)

    by phantomfive ( 622387 ) on Sunday September 27, 2026 @07:40PM (#66352536) Journal
    It's kind of amazing how quickly investment bankers noticed a limited resource (video cards, etc) and then injected themselves into the middle of it to get a cut. Insult them if you must, they are amazing at what they do.

    • I guess that makes them vulture capitalists.

    • Re: (Score:2)

      by shanen ( 462549 )

      Stop insulting the poor but honest and hard-working vultures.

      (Low hanging joke I was looking for, but a pretty good FP anyway.)

      Funny anecdote time. I once worked for a lawyer, at least technically. He had the degree and passed the bar, but never practiced law. He also had an MBA and had spent some years working for a major bank before taking over his father's real estate company (where I was the database programmer). Also a drinking buddy, and he really surprised me with some of the negative things he said

  • They'll get bailed out like they always do. Voters will get distracted by some little moral panic like trans or heavy metal music or I think they're working on furries is the next big moral panic. Doesn't matter there's something your grandpa are you if you're the grandpa or going to freak the fuck out about because TV said so. If all else fails don't throw socialism in your face and you'll get scared that somebody's going to steal all your money while the Epstein class steals all your money and then you'll

    • Re:There's no risk whatsoever (Score:4, Informative)

      by quenda ( 644621 ) on Sunday September 27, 2026 @10:51PM (#66352680)

      Voters will get distracted by some little moral panic like trans or heavy metal music

      Human nature. If not those, its toxic masculinity, systemic racism, AI datacentres, imminent facism, climate doom, or evil corporations. We love a bogey-man, the "folk devil".

              The one thing everybody seems to be worried about, regardless of politics, is perhaps social media algorithms? And China. Two things.

    • Exactly, there is no risk for them. Society will foot that bill. Additionally why bother investing in infrastructure when you're supposed to be dead, hopefully soon and stop draining resources from the precious billionaires.

  • Oracle's New Mexico "Project Jupiter" in trouble (Score:5, Interesting)

    by fahrbot-bot ( 874524 ) on Sunday September 27, 2026 @08:04PM (#66352548)

    From: Oracle Wants Protection If Its AI Data Center Is Delayed. Here's What That Changes for Investors. [fool.com]

    Bloomberg reported that Oracle has sent a legal notice to the developer of its $X billion "Project Jupiter" AI data center campus scheduled to come online in 2028. It cites "force majeure," a contract provision that offers protection if events outside of a company's control disrupt a deal -- in this case, the delay of a critical natural gas pipeline.

    Oracle is hoping to delay rent payments if the data center is not delivered by the deadline. The developer, a subsidiary of Blue Owl Capital, must first agree that a qualifying event occurred, and Oracle would still be on the hook for certain fees and other payments.

    While Oracle insists the project is on schedule, investors are growing increasingly worried. The $18 billion in project financing for Poject Jupitor have fallen into "stressed" territory. That means the banks that loaned the money are willing to let them go for considerably less than they are worth in name, fearing the loans may go bad. The Financial Times reported that as of last Friday, they had fallen to around 89 to 91 cents on the dollar.

    That's in part due to the stiff local opposition the 1,400-acre campus is facing. Residents are concerned with the environmental impact as well as noise pollution -- a common theme from projects around the country. A recent poll by the Albuquerque Journal found 65% opposed to their construction in the state.

    The company has had trouble with regulators as well. The plan to bring natural gas to the site was blocked by the state's land office, so was a revised plan.

  • At the moment, GPU-heavy AI data centers are paying off their silicon within a relatively quick 3 to 4 year time frame.

    Compare this to the more typical 4 to 8 years before getting a decent ROI on chips from CPU-heavy “traditional” cloud data centers.

    • GPU-heavy AI data centers are paying off their silicon within a relatively quick 3 to 4 year time frame.

      Oh, please. The whole "AI rivalyushon" has only been with us for "3 to 4 years" (since December 2022, when chatgpt launched), and the datacenter gold rush started in late 2024, so we're not even 2 years into it.

      Nobody has been in operation for 3 years yet to "pay off the silicon" even by your yardstick, it is all crazy projections based on daydreaming.

      The resource misallocation failure that is the "AI" bubble is the most stupid thing that the "huge manatee" could have done and because of the moronic "look

    • Might be some good money in owning one. [youtu.be]

  • 80% and nonusers still have to foot the bill? (Score:4, Interesting)

    by BitterEpic ( 10503015 ) on Sunday September 27, 2026 @08:29PM (#66352572) Homepage

    You can't reasonably double revenue infinitely. At some point gravity takes effect.

    Us non AI users have to pay increased electrical, increased water, and increased computer prices among many other induced problems. These fuckers are why you are seeing less physical switch games as an example

    And despite the increased costs for non users, which is never calculated like how inflation is, THE NEED MORE MONEY?

    If more people said, Kill Sam Altman, I think we would see more social progress on this devil.

  • The first step in dealing with AI issues is to give full details about how AI is developed.

    A HUGE amount has been written about AI, but apparently there are no books or articles about how AI is developed.

    If people knew more, maybe there would be contributions to understanding of how to make AI safe.

    • Re: AI first step: Give details about AI design. (Score:4, Informative)

      by Dantu ( 840928 ) on Sunday September 27, 2026 @10:21PM (#66352656)
      Much of the research is published in peer reviewed journals. There are textbooks and even online tutorials that will walk you through building a toy llm 'from scratch' in a few hours on a reasonably powerful desktop.

      Without an undergraduate degree in math, computer science, or similar those will be very difficult to read, but not impossible. You'll have to start from the foundational concepts and work your way up , don't expect a 5-page overview that tells you how to build a Frontier Model. There are also plenty of guides written for lay people, but you'll have to rely more on analogies.

  • IPO, anyone?
  • When I was in my late teens there was a neighborhood with computer stores.
    They would have sheets of specials on components. I would go around and collect all the sheets, find somewhere to sit and compare prices.
    Hardware review websites were big at the time (Tom's, etc.) and I knew where all the components ranked. So I made an educated decision before speccing out a system.
    Saving a few dollars here and there I would optimize.
    Moore's law was big and framerates were low, benchmarks between components would have significant percentage differences.

    Moore's law has stopped the gamers did it, GPUs used for rendering millions of pixels proved similar in intention to AI machine learning requirements.
    Going to computer stores now is depressing, the huge gains are gone.
    AI is often wrong and almost always lowest common denominator. Teenage boys blowing up mutants and Nazi's did more for computing than AI has.

  • $3 Trillion off the books commitments (Score:5, Interesting)

    by Required Snark ( 1702878 ) on Monday September 28, 2026 @01:47AM (#66352786)
    From the Deja Vu all over again department: [yahoo.com]

    Investor Michael Burry of The Big Short fame issued a fresh warning on the AI boom, observing that the hyperscalers leading the charge are amassing $3 trillion in financial commitments that aren't reflected in their balance sheets.

    "These liabilities, I say, are, in essence, in hypergrowth mode," ... Burry singled out Amazon, Meta Platforms, Alphabet, Microsoft and Oracle for proceeding with enormous capital expenditures.

    Michael Burry was of the figures in The Big Short [wikipedia.org] which depicted the 2008-2010 financial meltdown. Burry and a few others understood the over-leveraging in housing market lending and correctly predicted it's crash, so his track record is very good.

    The accounting trick this time is that the contractual commitments don't show up when they are made.

    The pack of hyperscalers is holding $1.2 trillion in future lease commitments along with $1.5 trillion in commitments to purchase AI-related hardware and equipment, such as memory chips. The latter can be kept off a firm's balance sheet until the products ultimately reach the hyperscalers and each party fulfills its obligations under current accounting rules.

    The crucial difference this time is the explosive growth of the National Debt created by tax cuts for billionaires and a ruinous unnecessary foreign war. Ordinary tax payers will be the ultimate victims if history is any guide.

    • Re: (Score:2)

      by puzzled ( 12525 )

      They are positioning AI as the nuclear weapons of the 21st century, angling for a nationalization as a strategic weapon when the bottom drops out of it.

      • But it is analogous to nuclear weapons development. It requires a massive buildout and resources, and can be used to directly attack other nation states in ways that prior means just can't.

        From computer viruses to greatly accelerated bioweapons research to just shutting down your enemy's electrical grid, the applications are vast, and growing in capabilities daily.

        If the US or China or any up and commers enter a full scale war, you better believe datacenters will be targeted. Another reason not to want th

    • Ordinary tax payers will be the ultimate victims if history is any guide.

      You have no idea how true that statement is. We will be funding our own personal "social monitor" which will give us tickets/citations for violating the morality code. The future looks so gross. 1984 didn't even come close to how horrific this will be. And yet everyone is just sitting here while the noose is surrounding their necks. All of your devices are tattletales. Your car is legally enforced to take action for/against you.

      This is not the future I want for others. I want to offer Freedom and Liberty to

  • imminent nationalization (Score:3)

    by puzzled ( 12525 ) on Monday September 28, 2026 @02:28AM (#66352816) Homepage Journal

    The AI bubble bursting will wreck the economy far harder than the Dotcom bubble did. And the dynamic is OBVIOUS. This is not an "if" problem, it's a "when" problem.

    If AI produces a maximal result along the lines of what the frontier labs suggest, it'll eat fifty million jobs, which will wreck the economy far harder, and for far longer.

    The constant chatter about AI breakout is half legitimate concern and half positioning to nationalize it, shielding the circular dealing crew from consequences.

    This will not be Skynet; as a society we are far too primed to envision events that can be told in a single two hour action adventure with a clear, satisfying ending. When the historians get to this they will note the breakout happened 2025 - 2027 -- because that will be the time where human network threats enhanced by AI will starting further enhancing AI.

    There are no "sides" to this, it'll be like the African savanna - lions, leopards, hyenas, cheetahs, wild dogs, servals & caracals, clear down to my personal favorite, the black backed jackal. A network of carnivores of various sizes pursue networks of herbivores. Nation states, corporations, non-state actors, activist groups, talented individuals; all are making use of AI in conflicts already.

    The genie can not be put back in the bottle, the open models are only a little behind the frontier, and things are going to keep happening no matter what bellicose policy pronouncements come from an increasingly irrelevant Washington, D.C.

    I'll be riding the Claude subsidy until it ends, then hopefully have acquired a potent professional GPU or unified memory setup of my own. Won't be nearly as quick, but it'll keep me moving.

    Now scale that thinking up by whatever percentage of eight billion people have technical capabilities. That's the future.

    • The real problem with AI is that it is not productive. We are spending all of this money, and what are we getting for it? An awkward coding assistant? Yeah no. The real purpose of AI is to monitor YOU, as it already does with Flock cameras.

      • That's not a good argument. Intel on what people are doing is something being produced. The problem isn't that AI isn't productive. It's capitalism. The benefits will be used to oppress humanity. The luddites were right.

      • Re: (Score:2)

        by ukoda ( 537183 )

        The real purpose of AI is to monitor YOU

        Well done, you saw half the picture. The part you missed was the subscription model. Your job as a good little consumer is decide which AI providers you will give money too and how much you should give them. If you are unsure you can always ask AI. Remember thinking is difficult, it can make your head hurt, it is far simpler to just remember how to read your credit card details.

    • I don't get the vibe that it can eat enough jobs to pay for itself once it isn't a "loss leader" anymore. Like the only thing I depend on it for now is searching Outlook because the builtin search is busted now that we're off the PST files and in the cloud. The rest is Better Intellisense and Interactive Stack Overflow. It saves me some time, but I'm still not sure it is worth the cost of the license.

  • A new Brookings Institution study notes the "strikingly physical" economic footprint of AI's buildout, from specialized chips and electricity to purpose-built data centers. (Two-thirds of a data center's costs are IT equipment, with one-third going to real estate and its associated power infrastructure.)

    Go figure Greed N. Corruption will never measure that AI expansion in the REAL metric it needs to be measured in; Cost Per Human Job Lost.

    Perhaps Greed will finally get it when they find themselves the featured dish on the menu. Eat The Rich, isn't a hard concept to grasp.

  • Why the AI boom makes inflation harder to tame [cnn.com]

    Through 2032, that number will reach $10.3 trillion, claims Columbia University economist Stijn Van Nieuwerburgh in a paper published Wednesday by the Brookings Institution. For perspective: Remember the $1.2 trillion bipartisan infrastructure law signed by then-President Joe Biden in 2021 that became an inflation bugaboo? Projected AI expenditures are equivalent to spending every last dollar allocated from one of those bills each year over the course of a decade.

    That spending – just on AI infrastructure, not on the technology itself – is on pace to comprise 1.9% of all US economic activity this year, according to Goldman Sachs. But that’s forecast to effectively double: On average, AI infrastructure spending will top 3.6% of America’s gross domestic product each year through 2032, according to Van Nieuwerburgh.

    OTOH, as Herbert Stein [wikipedia.org] put it:

    What economists know seems to consist entirely of a list of things that cannot go on forever, and this may be one of them. But if it can’t go on forever it will stop. And if we never do anything that we can’t go on doing forever we will never do very much.

Slashdot Top Deals

It is wrong always, everywhere and for everyone to believe anything upon insufficient evidence. - W. K. Clifford, British philosopher, circa 1876

Close