IBM CEO says there is 'no way' spending on AI data centers will pay off

Summary

AI companies are spending billions on data centers in the race to AGI. IBM CEO Arvind Krishna has some thoughts on the math behind those bets.Data center spending is on the rise. During Meta's recent earnings call, words like "capacity" and AI "infrastructure" were frequently used. Google just announced that it wants to eventually build them in space. The question remains: will the revenue generated from data centers ever justify all the capital expenditure?On the "Decoder" podcast, Krishna concluded that there was likely "no way" these companies would make a return on their capex spending on data centers.Couching that his napkin math was based on today's costs, "because anything in the future is speculative," Kirshna said that it takes about $80 billion to fill up a one-gigawatt data center."Okay, that's today's number. So, if you are going to commit 20 to 30 gigawatts, that's one company, that's $1.5 trillion of capex," he said. Krishna also referenced the depreciation of the AI chips inside data centers as another factor: "You've got to use it all in five years because at that point, you've got to throw it away and refill it," he said. Investor Michael Burry has recently taken aim at Nvidia over depreciating concerns, leading to a downturn in AI stocks."If I look at the total commits in the world in this space, in chasing AGI, it seems to be like 100 gigawatts with these announcements," Krishna said.At $80 billion each for 100 gigawatts, that sets Krishna's price tag for computing commitments at roughly $8 trillion."It's my view that there's no way you're going to get a return on that, because $8 trillion of capex means you need roughly $800 billion of profit just to pay for the interest," he said.Reaching that number of gigawatts has required massive spending from AI companies — and pushes for outside help. In an October letter to the White House's Office of Science and Technology Policy, OpenAI CEO Sam Altman recommended that the US add 100 gigawatts in energy ...