The CEO of one of China\u2019s top chipmakers just sent a stark warning against big tech\u2019s unprecedented race to build out as many AI data centers as it can.<\/p>\n
\u201cCompanies would love to build 10 years\u2019 worth of data center capacity within one or two years,\u201d Semiconductor Manufacturing International Corp.\u2019s Co-CEO Zhao Haijun said Wednesday on a call with analysts, per Bloomberg<\/a>. \u201cAs for what exactly these data centers will do, that hasn\u2019t been fully thought through.\u201d<\/p>\n Just Alphabet, Microsoft, Meta, and Amazon alone are expected to spend nearly $700 billion<\/a> on AI this year, repeatedly assuring<\/a> investors that demand outpaces supply<\/a>. Over the next three years, the price tag of the data center buildout is expected to exceed $3 trillion<\/a>.<\/p>\n Those financial commitments have started to spook<\/a> investors. Meanwhile, the picture that is gradually forming has led to the current AI hype being compared to the dot-com bubble<\/a>.<\/p>\n Invigorated by the excess investment flowing into building out the internet and anticipated demand for internet services, the telecommunications industry spent billions<\/a> of dollars to lay out fiber optic cables in the late 1990s. By 2002, the dot-com bubble had long burst, and still less than 5% of the fiber optic network was reportedly<\/a> in use. A telecoms crash quickly followed the dot-com bubble burst, and these unused fiber networks, called \u201cdark fiber,\u201d sat idle for years.<\/p>\n Eventually, though, the demand for the internet did pan out as expected, just years late. As demand for the internet grew exponentially, a lot of the infrastructure that was built out in the late 90s was eventually used.<\/p>\n For AI, though, the situation might be a little different: AI chips used in these data centers have a relatively clear expiration date, and if demand doesn\u2019t pan out as expected before these chips expire, then that means these companies will have flushed a whole lot of money and resources down the drain.<\/p>\n Meta says its chips are now good for roughly five and a half years, up from a previous estimate of four years. Nvidia executives have claimed<\/a> that the company\u2019s chips that were shipped out six years ago are still in full use.<\/p>\n But even if the chips themselves are fine, their value also depreciates as new, better models get churned out. At its current rate, Nvidia releases a new flagship AI chip<\/a> every year.<\/p>\n The depreciation of the value of chips is factored into company earnings, but industry experts are having a hard time seeing eye to eye on whether the current estimates are realistic.<\/p>\n Some argue that a six-year depreciation cycle is perfectly reasonable,<\/a> and older GPUs will still be desirable as cheaper alternatives when newer, more advanced versions come out. On the other hand, you have investors like Michael Burry<\/a> (of \u201cThe Big Short\u201d fame) who claim<\/a> that the actual useful life of an AI chip is no more than 2-3 years.<\/p>\n \u201cBy my estimates, they will understate depreciation by $176 billion 2026-2028,\u201d Burry said in a post<\/a> on X.<\/p>\n