Renowned short-seller Jim Chanos has raised concerns about potential overbuilding in the data center sector, likening it to the 2000 fiber optic bubble. His remarks come as major tech companies, including Microsoft, Amazon, and Google, announce significant expansion initiatives.
Chanos expressed skepticism about the industry's optimistic outlook for data center growth, particularly during the artificial intelligence boom. He referenced past claims from the fiber optic industry regarding 'infinite' demand, which he believes were misleading.
Microsoft is set to invest $80 billion in AI-enabled data centers in fiscal 2025, with more than half of this budget allocated to projects in the United States. Concurrently, Amazon is developing its Trainium 2 AI chip to compete in the $100 billion AI chip market, while Google has committed to substantial global data center investments, including an $850 million facility in Uruguay.
Chanos, known for predicting Enron's collapse, noted that despite industry claims of constraints on data center development, capital expenditures continue to rise. He pointed out that historical internet usage growth has been overstated, suggesting a disconnect between infrastructure investments and actual demand.
Market observer Brad Johnson acknowledged the possibility of overspending in the current cycle but highlighted unique challenges in data center development, such as power availability and connectivity needs. Nonetheless, Chanos remains doubtful about the sustainability of current spending trends.