AI Data Centers Are an Even Bigger Disaster Than Previously Thought

[NickB79]

https://futurism.com/future-society/ai-data-centers-finances

“Adding the two years together, and using the math from my prior post, you’d need approximately $1 trillion in revenue to hit break even, and many trillions more to earn an acceptable return on this spend,” he writes.

“If the economics don’t work, doing it at massive scale doesn’t make the economics work any better — it just takes an industry crisis and makes it into a national economic crisis,” he concludes.

Overall, the pessimists broadly agree: it’s no longer a matter of if AI is massively overhyped, but when the whole thing comes crashing down.

[Jack Valentino]

1. If it slows down the 'Skynet scenario' and massive job losses--- that will be a good thing.

The A.I. we already have is pretty amazing, from my limited experimentation with it---
but the over-investment in it is starting to resemble the "dot.com bust" !

[IbogaProject]

12. This is vastly larger than the DotCom mania

[Jack Valentino]

14. At least in terms of demands upon electricity, so it seems...

and I don't dispute your main premise, but I don't know

[Aussie105]

2. AI is a cause looking for a reason to exist.

A profitable reason to exist, that is.

Investors are asking the hard questions.
If not now, soon.

[Gimpyknee]

3. These data centers are using a tremendous amount of energy.

[lame54]

5. I know. That's energy that could be going to...

Mining imaginary money

[multigraincracker]

7. You mean like bit coins?

Looks like the stock market is figuring it out this week.

[IronLionZion]

8. and water for cooling

and they make a tremendous amount of noise disturbing the people living nearby.

[lame54]

4. Can they make an AI vid...

Depicting that crash

[dgauss]

6. I asked ChatGPT this question:

"What happens if the stock market boom in AI is overhyped and crashes the stock market?"

This was the answer

If the AI stock market boom is overhyped and leads to a crash, several things could unfold:

1. Massive Losses for Investors

Panic Selling: If the bubble bursts, investors who piled into AI stocks during the boom might panic and sell off their holdings quickly, leading to steep declines in stock prices.

Retirement Accounts and 401(k)s Hit: Many retail investors have exposure to the stock market through retirement accounts, and a market crash could decimate these savings.

Loss of Wealth: A significant portion of wealth tied to AI stocks could vanish, especially for those who invested heavily without fully understanding the risks.

2. Valuation Adjustments

Overinflated Prices Corrected: Many AI companies, particularly startups or those with speculative growth potential, could see their valuations drop drastically as investors realize the actual economic value doesn't match the market expectations.

Shaking Out Weak Players: Some AI companies that were overvalued or had unsustainable business models could fail or be acquired at bargain prices, while the strongest firms survive the fallout.

3. Broader Economic Impact

Investor Confidence Shaken: A crash in AI stocks could spill over into broader financial markets, as investor sentiment becomes more cautious. This could lead to lower consumer confidence, reduced investment, and possibly a broader economic slowdown.

Job Losses in Tech: If AI stocks plummet, it might hurt companies that were rapidly expanding to meet the demand for AI solutions. These companies might lay off employees or slow down hiring, contributing to an economic contraction.

4. Regulatory Scrutiny

Increased Scrutiny on AI Companies: A crash could lead to heightened regulatory scrutiny on AI companies, particularly around how they hype their products and projections. This could lead to new rules about transparency in marketing and financial disclosures.

Governments Step In: Governments may intervene to stabilize markets or ensure that the AI industry doesn't cause widespread economic damage, potentially leading to bailouts or other financial measures.

5. Impact on Innovation

Slowdown in R&D: If companies lose significant capital or if investors pull out of AI, research and development could be negatively impacted. AI innovation might slow down, which could affect the pace of progress in the industry.

Loss of Trust: A crash could lead to a public perception that AI is a speculative "fad" rather than a transformative technology, dampening future enthusiasm and innovation in the sector.

6. Possible Long-Term Positive Effects

Refined Focus on Viability: After the crash, AI companies might focus more on practical, viable applications instead of overhyping speculative technologies. This could result in a more grounded, sustainable path forward for AI.

Market Maturity: After an initial boom and bust, the AI market could mature, with more sustainable growth and realistic valuations. Over time, this might lead to more reliable companies in the space, benefiting the economy in the long term.

Historical Context:

The stock market has seen similar boom-and-bust cycles before. For example:

Dot-com Bubble (1999-2000): Internet stocks were massively overvalued, and when the bubble burst, many companies went bankrupt, but the industry as a whole eventually matured and transformed the global economy.

Subprime Mortgage Crisis (2008): The overinflated housing market collapsed, causing a global recession. After the crash, new financial regulations were put in place, and recovery took several years.

In short, while the overhyping of AI stocks could lead to a dramatic crash, it’s not necessarily the end of AI's potential. It would likely lead to a reckoning that sorts out unsustainable players, allowing the more grounded and truly innovative companies to emerge stronger in the long term.

[IronLionZion]

9. That's correct. ChatGPT researched and answered your question

OpenAI is probably one of the companies that will survive such a crash.

[dgauss]

11. I did find the answer interesting.

The market and other financial effects if (and it is a hypothetical) the stock market crashes seemed realistic and grounded in history.

What happens after that, if it were to happen, is still distant speculation.

There was a somewhat hopeful note at the end, though mostly from a finance point of view, saying "It would likely lead to a reckoning that sorts out unsustainable players, allowing the more grounded and truly innovative companies to emerge stronger in the long term."

But that doesn't address at all the impact on society.

[lame54]

15. I was hoping for a video representation

[LudwigPastorius]

10. Oh, some companies investing gazillions in data centers will definitely bite the big one, but...

that doesn't mean all of them will.

This type of 'brute force' scaling of AI hasn't met its practical limit yet.

I have no doubt that U.S. government will take up any funding slack brought about by shy private investors.

[Warpy]

13. When your only tool is a hammer, everything looks like a nail.

AI is alrready a very useful tool in science and medicine. It might take over some of the most boring jobs out there. What it won't do is replace human beings in most jobs, AI lacks the intellectual capacity of even the dumbest people out there, even though those people aren't using it much. The tech dude fantasy of having machines supply their needs, repaired by other machines ad infinitum while they dispose of the working class they think only exist right now to mess up the scenery is not going to be realized.

It will be loads of fun to watch them found Galt's Gulch to try it out.