Joe Tsai, the chair of the Chinese e-commerce group Alibaba, has warned he is “seeing the beginning of some kind of bubble” in the $3 trillion AI datacenter market. His warning adds a prominent voice to the growing chorus of “bubble” theorists questioning the “debt-fueled exuberance” of the current boom.
Tsai’s concern is specifically aimed at “speculative” projects. He pointed to developers “raising funds for construction without commitments from potential customers.” This is the $1.5tn “speculative” side of the market that is being funded by “private credit,” a “shadow banking” sector that has alarmed regulators.
This contrasts with the “healthy” spending by “hyperscalers” like Google and Microsoft, who are spending $750bn of their own cash. But even their spending is contributing to the “exuberance.”
Tsai’s warning is supported by other skeptics. The Uptime Institute, which rates datacenters, cautioned that “many” of the projects announced “with a fanfare” are “speculative” and “will never be built.” A hedge fund founder has also warned that these “quickly depreciating assets” will lose value twice as fast as they generate revenue.
While the market celebrates Nvidia’s $5tn valuation and ChatGPT’s 800 million users, Tsai’s warning from within the industry is a significant red flag. It suggests the $3tn boom may be partially built on “speculative” hype that is disconnected from real-world demand.
