Alibaba Group Holding Ltd (阿里巴巴) chairman Joe Tsai (蔡崇信) yesterday warned of a potential bubble forming in data center construction, arguing that the pace of that buildout might outstrip initial demand for artificial intelligence (AI) services.
A rush by big tech firms, investment funds and other entities to erect server bases from the US to Asia is starting to look indiscriminate, Tsai told the HSBC Global Investment Summit in Hong Kong.
Many of those projects are built without clear customers in mind, Tsai said.
Photo: AFP
From Microsoft Corp to Softbank Group Corp, tech firms on both sides of the Pacific Ocean are spending billions of dollars buying the Nvidia Corp and SK Hynix Inc chips crucial to AI development.
Alibaba itself — which last month said that it was going all-in on AI — plans to invest more than 380 billion yuan (US$52 billion) over the next three years.
Server farms are springing up from India to Malaysia, while US President Donald Trump is touting a Stargate project that envisions an outlay of US$500 billion dollars.
Many on Wall Street have begun to question that spending, especially after Chinese firm DeepSeek (深度求索) released an open-source AI model that it claims rivals US technology, but was built at a fraction of the cost.
Critics have also pointed out the persistent dearth of practical, real-world applications for AI.
“I start to see the beginning of some kind of bubble,” Tsai told delegates.
Some of the envisioned projects commenced raising funds without having secured “uptake” agreements, he added.
“I start to get worried when people are building data centers on spec. There are a number of people coming up, funds coming out, to raise billions or millions of capital,” he said.
Tsai talked about how Alibaba was undergoing a “reboot” and rehiring after years of regulatory scrutiny that crimped growth.
The firm has initiated programs to acquire the AI talent it needs to further its stated ambition of exploring artificial general intelligence.
At the same time, Tsai had choice words for his US rivals, particularly with their spending.
Just this year, Amazon.com Inc, Alphabet Inc and Meta Platforms Inc pledged to spend US$100 billion, US$75 billion and up to US$65 billion respectively on AI infrastructure.
Microsoft has said it expects to spend US$80 billion this fiscal year on AI data centers, but that pace of spending growth should begin to slow in the year starting July.
“I’m still astounded by the type of numbers that’s being thrown around in the United States about investing into AI,” Tsai told the audience. “People are talking, literally talking about US$500 billion, several 100 billion dollars. I don’t think that’s entirely necessary. I think in a way, people are investing ahead of the demand that they’re seeing today, but they are projecting much bigger demand.”
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