AI infrastructure's all-out spending spree
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Chipmakers, cloud providers, energy producers and AI companies are all flooring the pedal on infrastructure spending to support an AI-driven world that doesn't yet exist.
Why it matters: Investors are placing hundred-billion-dollar bets that demand for AI is about to explode, while the technology has yet to persuasively demonstrate its mass consumer appeal or its business-efficiency benefits.
Driving the news: The AI Infrastructure Partnership announced Wednesday that it was adding Nvidia and xAI as new partners in its fund, which aims to build data centers and energy facilities supporting AI, mostly in the U.S.
- Microsoft, BlackRock and UAE-based MGX were already key investors in what was announced last September as a $30 billion fund that could be leveraged up to $100 billion.
- Thursday, Nvidia CEO Jensen Huang told the Financial Times he expects his company will manufacture "several hundred billion" dollars' worth of electronics in the U.S. over the next four years.
- The Abu Dhabi-based wealth fund ADQ and U.S. heavyweight Energy Capital Partners intend to invest over $25 billion in projects to power data centers and other industrial consumers, Axios' Ben Geman reported Wednesday.
These deals and announcements all follow the high-profile launch of Stargate, a partnership — including OpenAI, Oracle, SoftBank and MGX — that's raising an initial $100 billion (toward an aspirational total of $500 billion) to build U.S. data centers for OpenAI.
- The Stargate announcement came straight from President Trump in the Oval Office the day after his inauguration.
The big picture: The new deals also further extend an AI spending spree that saw massive capital-expenditure growth from tech giants Microsoft, Alphabet/Google, Amazon and Meta in 2024 — a trend the companies say will continue.
The intrigue: The Trump administration is touting all this domestic investment as a win for its efforts to boost domestic manufacturing and growth.
- But much of the investment would likely have happened no matter who was in the White House.
Two key forces are driving the spending: AI euphoria and geopolitical risk.
- The euphoria is the tech industry's certainty that AI is destined to be the underlying technology for a new, bigger-than-ever wave of digital growth.
- The risk is that the AI industry is dependent on a handful of dominant monopolies — U.S.-based Nvidia (which designs chips), Taiwan-based TSMC (which manufactures chips) and Netherlands-based ASML (which makes the machines that make chips).
- This wildly profitable global semiconductor supply chain is vulnerable in the event of an attack on Taiwan by China, which has long claimed the island, or a major earthquake in Taiwan.
The other side: This week Nvidia announced the next generation of its advanced AI chips, called Rubin, and promised it would be twice as fast as today's top-of-the-line Blackwell.
- But The Information reports that Blackwell is only now beginning to arrive in most companies' data centers.
- While "Nvidia's biggest customers like Google, Meta and OpenAI are dying to receive clusters of Blackwells as they race to develop cutting-edge AI, no one else seems as interested," the Information's Anissa Gardizy writes.
- That's a striking contrast to the scramble for, and shortages of, Hopper chips — the generation that preceded Blackwell — in the period after ChatGPT's debut more than two years ago.
The bottom line: Tech in general, and semiconductors in particular, have always been cyclical businesses. First you overbuild, then you suffer through a glut, then there's a shortage — and then you overbuild again.
- It happened with memory chips at the start of the '90s, and it happened with internet connectivity during the dotcom boom and bust.
- Plenty of people in the AI industry believe this time is different. History suggests they're headed for a letdown.
