{"id":178933,"date":"2025-12-11T04:00:07","date_gmt":"2025-12-11T04:00:07","guid":{"rendered":"https:\/\/www.newsbeep.com\/il\/178933\/"},"modified":"2025-12-11T04:00:07","modified_gmt":"2025-12-11T04:00:07","slug":"ais-517-billion-problem-are-chips-getting-old-too-fast","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/il\/178933\/","title":{"rendered":"AI\u2019s $517 billion problem: Are chips getting old too fast?"},"content":{"rendered":"

NEW YORK – In pursuit of the AI dream, the tech industry in 2025 has plunked down about US$400 billion (S$517 billion) on specialised chips and data centres, but questions are mounting about the wisdom of such unprecedented levels of investment.<\/p>\n

At the heart of the doubts: overly optimistic estimates about how long these specialised chips will last before becoming obsolete.<\/p>\n

With persistent worries of an AI bubble and so much of the US economy now riding on the boom in artificial intelligence, analysts warn that the wake-up call could be brutal and costly.<\/p>\n

\u201cFraud\u201d is how renowned investor Michael Burry, made famous by the movie The Big Short, described the situation on X in early November.<\/p>\n

Before the AI wave unleashed by ChatGPT, cloud computing giants typically assumed that their chips and servers would last about six years.<\/p>\n

But Mr Mihir Kshirsagar of Princeton University\u2019s Center for Information Technology Policy says the \u201ccombination of wear and tear along with technological obsolescence makes the six-year assumption hard to sustain\u201d.<\/p>\n

One problem: chip makers \u2013 <\/p>\n

with Nvidia the unquestioned leader<\/p>\n

<\/a> \u2013 are releasing new, more powerful processors much faster than before.<\/p>\n

Less than a year after launching its flagship Blackwell chip, Nvidia announced that Rubin would arrive in 2026 with performance 7.5 times greater.<\/p>\n

At this pace, chips lose 85 per cent to 90 per cent of their market value within three to four years, warned Mr Gil Luria of financial advisory firm D.A. Davidson.<\/p>\n

Nvidia CEO Jensen Huang made the point himself in March, explaining that <\/p>\n

when Blackwell was released<\/p>\n

<\/a>, nobody wanted the previous generation of chip anymore.<\/p>\n

\u201cThere are circumstances where Hopper is fine,\u201d he added, referring to the older chip. \u201cNot many.\u201d<\/p>\n

AI processors are also failing more often than in the past, Mr Luria noted.<\/p>\n

\u201cThey run so hot that sometimes the equipment just burns out,\u201d he said.<\/p>\n

A recent Meta study on its Llama AI model found an annual failure rate of 9 per cent.<\/p>\n

For Mr Kshirsagar and Mr Burry alike, the realistic lifespan of these AI chips is just two or three years.<\/p>\n

Nvidia pushed back in an unusual November statement, defending the industry\u2019s four-to-six-year estimate as based on real-world evidence and usage trends.<\/p>\n

But Mr Kshirsagar believes these optimistic assumptions mean the AI boom rests on \u201cartificially low\u201d costs \u2013 and consequences are inevitable.<\/p>\n

If companies were forced to shorten their depreciation timelines, \u201cit would immediately impact the bottom line\u201d and slash profits, warned Mr Jon Peddie of Jon Peddie Research.<\/p>\n

\u201cThis is where companies get in trouble with creative bookkeeping.\u201d<\/p>\n

The fallout could ripple through an economy increasingly dependent on AI, analysts warn.<\/p>\n

Mr Luria isn\u2019t worried about giants like Amazon, Google, or Microsoft, which have diverse revenue streams. His concern focuses on AI specialists like Oracle and CoreWeave.<\/p>\n

Both companies are already heavily indebted while racing to buy more chips to compete for cloud customers.<\/p>\n

Building data centres requires raising significant capital, Mr Luria pointed out.<\/p>\n

\u201cIf they look like they\u2019re a lot less profitable\u201d because equipment must be replaced more frequently, \u201cit will become more expensive for them to raise the capital.\u201d<\/p>\n

The situation is especially precarious because some loans use the chips themselves as collateral.<\/p>\n

Some companies hope to soften the blow by reselling older chips or using them for less demanding tasks than cutting-edge AI.<\/p>\n

A chip from 2023, \u201cif economically viable, can be used for second-tier problems and as a backup,\u201d Mr Peddie said.<\/p>\n

AI\/artificial intelligenceNvidiaTechnology and research<\/p>\n","protected":false},"excerpt":{"rendered":"NEW YORK – In pursuit of the AI dream, the tech industry in 2025 has plunked down about…\n","protected":false},"author":2,"featured_media":178934,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[345,343,344,85,46,125],"class_list":{"0":"post-178933","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-artificial-intelligence","8":"tag-ai","9":"tag-artificial-intelligence","10":"tag-artificialintelligence","11":"tag-il","12":"tag-israel","13":"tag-technology"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/178933","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=178933"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/178933\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/178934"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=178933"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=178933"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=178933"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}