Alibaba Chairman Warns of Potential AI Data Center Bubble Amid Massive Industry Investments

Alibaba's Tsai Warns of a 'Bubble' in AI Data Center Buildout

Alibaba Group Holding Ltd. Chairman Joe Tsai warned of a potential bubble forming in datacenter construction, arguing that the pace of that buildout may outstrip initial demand for AI services. A rush by big tech firms, investment funds and other entities to erect server bases from the US to Asia is starting to look indiscriminate, the billionaire executive and financier said. Many of those projects are built without clear customers in mind, Tsai told the HSBC Global Investment Summit in Hong Kong Tuesday.

Alibaba exec warns of overheating AI infrastructure market

Joe Tsai says speculative datacenter builds could exceed actual demand Alibaba is warning of a datacenter spending "bubble" amid the rush to build infrastructure in anticipation of an AI feeding frenzy. Speaking at the HSBC Global Investment Summit in Hong Kong this week, Alibaba Group co-founder and chairman Joe Tsai expressed concern at the amount of funding being allocated to datacenter construction for AI development, saying it looks set to exceed actual market demand. "I start to see the beginning of some kind of bubble," said Tsai, who noted some of the projects are raising investment to build datacenters on spec, meaning they don't even have a buyer or tenant lined up before going ahead. Tsai's unease is based on the billions being committed by mega-corps, especially in the US. In January, Microsoft alone indicated its intention to invest $80 billion this year on building out its AI infrastructure, while Meta said it plans to pour $60-65 billion into more resources, and the Stargate Project said it expects to lay out as much as $500 billion over the next four years. AI investments in America seem to be outpacing current demand, Tsai cautioned. However, Alibaba itself also announced last month that its digital infrastructure splurge over the next three years will exceed the total it laid out in the prior decade, although the e-commerce and cloud giant did not specify exact investment figures. Warning signs of overheating datacenter expenditure emerged last month when financial services biz TD Cowen published a report claiming Microsoft is rowing back on leases for datacenter capacity it intended to take out after finding itself "in an oversupply position." In January, Gartner said businesses were uncertain about the benefits of investing in AI, and CIOs were beginning to question the assumption that AI would lead to a transformation, forecasting that 2025 "is going to be a year of the slide." According to recent figures from IDC, revenue earned from selling servers increased by 91 percent year-on-year in 2024, while for servers with an embedded GPU for AI processing it was an even greater jump of 192.6 percent. Despite mounting concerns that this level of infrastructure investment may be unsustainable, some industry watchers do not foresee a slowdown any time soon. Analyst Omdia has just raised its 2025 datacenter capex estimate from $561 billion to $576 billion, and the spending outlook for hyperscale cloud companies alone indicates capex could grow by more than 30 percent this year. However, Omdia did note that analysis of multibillion-dollar project announcements such as those from Crusoe, CoreWeave, Oracle, and OpenAI suggest individual parties may be claiming joint spend as their own capex or lumping capex and opex into spend predictions, which may be inflating the figures. ®

Alibaba's chairman thinks there's an AI data center bubble

The race to build out data centers for artificial intelligence is worrying one billionaire. Alibaba (BABA-0.27%) chairman Joe Tsai said that AI data center construction may overtake demand for the technology and that the rush to set up server projects is being made without fully considering customers, according to Bloomberg. "I start to see the beginning of some kind of bubble," Tsai said during the HSBC (HSBC+0.52%) Global Investment Summit in Hong Kong on Tuesday. "I start to get worried when people are building data centers on spec. There are a number of people coming up, funds coming out, to raise billions or millions of capital." Tsai reportedly added that some data center projects have started raising funding without customer contracts and that he's "still astounded by the type of numbers that's being thrown around in the United States about investing into AI." "People are talking, literally talking, about $500 billion, several hundred billion dollars," Tsai said. "I don't think that's entirely necessary. I think, in a way, people are investing ahead of the demand that they're seeing today, but they are projecting much bigger demand." Tsai's warning about AI spending comes amid plans by major tech companies to spend tens of billions of dollars each on AI development and infrastructure this year. Altogether, Meta (META+2.32%), Microsoft (MSFT+0.54%), Alphabet (GOOGL+1.43%), and Amazon (AMZN+1.26%) could spend a combined $320 billion on AI. In January, Meta CEO Mark Zuckerberg said the company is building a data center with a capacity of more than two gigawatts -- a site that could cover a large part of Manhattan. Additionally, President Donald Trump announced a half-a-trillion-dollar joint venture for AI infrastructure in January, alongside OpenAI CEO Sam Altman, SoftBank (SFTBY-0.65%) CEO Masayoshi Son, and Oracle (ORCL-0.40%) chief technology officer Larry Ellison. The Stargate Project "intends to invest $500 billion over the next four years building new AI infrastructure for OpenAI in the United States," the AI startup said in a statement. Stargate is starting with an initial $100 billion investment and counts OpenAI, SoftBank, Oracle, and Abu Dhabi-based AI investor MGX as initial equity funders. Meanwhile, TD Cowen analysts said in a note in February that Microsoft had canceled data center leases worth "a couple of hundred megawatts" -- potentially signaling an oversupply of AI infrastructure. In some cases, Microsoft said "facility/power delays" were a reason for termination, analysts said in the note, adding that Meta had previously used a similar justification to cancel data center leases. Microsoft said in response that it is "well positioned to meet our current and increasing customer demand."

Alibaba Head Warns AI Industry Is Showing Signs of Bubble

So far, companies have continued to pour tens of billions of dollars into building out massive data centers to meet the demands of increasingly power-hungry AI models. Whether the sector will continue to grow or find itself in for a rude awakening is anyone's guess. But something striking is that we're starting to see even tech executives worried that the massive spending could collapse under its own weight. Sluggish demand could struggle to keep up with a rapidly rising supply side, a lopsided equation that has executives freaked out. Despite having committed to spend more than $52 billion on AI development over the next three years, Chinese tech giant Alibaba's chairman Joe Tsai is now warning of a potential bubble starting to form in AI data center construction, Bloomberg reports. During an event in Hong Kong on Tuesday, Tsai said that many of these projects are being constructed without clear customers in mind. "I start to see the beginning of some kind of bubble," Tsai said, as quoted by Bloomberg. Alibaba shares slid by almost four percent today in response to the news. Perhaps one of the biggest warning signs so far was the explosive emergence of Chinese startup DeepSeek, which left Silicon Valley in shambles after creating a top-tier AI at a tiny fraction of the cost of its Western counterparts. The company's announcement of its reasoning model, which could keep up with OpenAI's most advanced offerings, triggered a more than $1 trillion selloff, with spooked investors wondering whether they had grossly overpaid the likes of OpenAI and Meta for years. Despite the massive shakeup, companies continue to pour astronomical sums into the construction of data centers. Just weeks into his second term, president Donald Trump announced a behemoth $500 billion AI infrastructure project, dubbed Stargate, with significant buy-in from OpenAI, investment company SoftBank, tech giant Oracle, and Abu Dhabi state-run AI fund MGX. Last week, news emerged that the project's first data center complex in the small Texas city of Abilene would have enough space for as many as 400,000 Nvidia AI chips, which would make it one of the biggest known clusters of AI computing power when completed by mid-2026. But to Tsai, it remains to be seen whether that kind of spending is actually warranted. "I start to get worried when people are building data centers on spec," he said this week. "There are a number of people coming up, funds coming out, to raise billions or millions of capital." Outside of Trump's Stargate, Amazon committed $100 billion to build out AI infrastructure. Meta CEO Mark Zuckerberg has pledged $65 billion for this year, while Google parent company Alphabet will invest $75 billion. To Tsai, that could be a terrible idea in the long run. "I'm still astounded by the type of numbers that's being thrown around in the United States about investing into AI," he said at this week's event. "People are talking, literally talking about $500 billion, several 100 billion dollars. I don't think that's entirely necessary," he added. "I think in a way, people are investing ahead of the demand that they're seeing today, but they are projecting much bigger demand."

Alibaba's Tsai Sounds Alarm On Signs Of AI Bubble: 'People Are Building Data Centers On Speculation' - Alibaba Gr Hldgs (NYSE:BABA), Amazon.com (NASDAQ:AMZN)

Alibaba Group Holding BABA Chairman Joe Tsai has expressed apprehension about a potential bubble in the AI data center construction sector. What Happened: At the HSBC Global Investment Summit in Hong Kong, Tsai cautioned that the rapid expansion of data centers could surpass the early demand for artificial intelligence (AI) services. He pointed out the reckless rush by tech firms, investment funds, and other entities to set up server bases from the U.S. to Asia, potentially leading to numerous projects being developed without a well-defined customer base, reported the South China Morning Post. "People are talking literally about $500 billion, several $100 billion [projects]. I don't think that is entirely necessary," Tsai stated. The Alibaba Chair spoke specifically about the AI investments in the U.S. "I start to get worried when people are building data centers on speculation," Tsai added. Major tech companies like Microsoft Corporation MSFT and SoftBank Group Corp. SFTBY are investing billions in AI development. Alibaba itself has plans to invest over 380 billion yuan ($70 billion) in AI within the next three years. Tsai voiced concerns about projects seeking funding without first securing uptake agreements. He specifically pointed out the heavy spending by US companies like Amazon.com, Inc. AMZN, Alphabet Inc. GOOGL GOOG, and Meta Platforms Inc. META on AI infrastructure. SEE ALSO: Palantir Market Cap Surges Over $50 Billion In 2025: Won't Be A 'Seller,' Says Analyst As He Foresees PLTR As An AI Play Why It Matters: Tsai's concerns resonate with Edward Yardeni, the President of Yardeni Research who stated that the "AI bubble" could be "bursting." He stated, "The fear now is that open-source large language models (LLMs) like DeepSeek and Manus, developed in China, require much less powerful semiconductors to operate." "If so, then AI capital spending will tumble along with the profit margins on AI systems," warned Yardeni. In February, TD Cowen analysts noted that Microsoft is canceling some U.S. data center leases, raising concerns about potential overinvestment in AI computing capacity. However, Goldman Sachs analysts predict that AI-related investments in chips and hardware could add $305 billion in revenue by the end of 2025. The analysts also noted that while tech giants are investing heavily in AI infrastructure, leading to a significant semiconductor revenue boom, most companies are still in the early stages of adoption. Given these factors, Tsai's warning about a potential bubble in data center construction is significant and warrants attention from investors and tech companies alike. Alibaba holds a momentum rating of 96.04% and a growth rating of 73.41%, according to Benzinga's Proprietary Edge Rankings. The Benzinga Momentum metric measures a stock's relative strength based on its price movement patterns and volatility over multiple timeframes, ranked as a percentile against other stocks. For an in-depth report on more stocks and insights into growth opportunities, sign up for Benzinga Edge. READ MORE: Hyundai Announces $21 Billion US Investment Amid Tariff Pressure: Trump Calls It Vindication Of His Administration's Use Of Levies Image via Shutterstock Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. AMZNAmazon.com Inc$202.64-0.31%Stock Score Locked: Want to See it? Benzinga Rankings give you vital metrics on any stock - anytime. Reveal Full ScoreEdge RankingsMomentum72.35Growth94.56Quality72.41Value49.59Price TrendShortMediumLongOverviewBABAAlibaba Group Holding Ltd$130.97-2.61%GOOGAlphabet Inc$169.60-0.19%GOOGLAlphabet Inc$167.42-0.16%METAMeta Platforms Inc$616.93-0.31%MSFTMicrosoft Corp$392.50-0.15%SFTBYSoftBank Group Corp$27.530.04%Market News and Data brought to you by Benzinga APIs

Jim Cramer Warns Against AI Compute Cutbacks After Alibaba's Joe Tsai Calls Data Center Boom A Bubble: 'It Would Be Horrendous' - Alibaba Gr Hldgs (NYSE:BABA), Amazon.com (NASDAQ:AMZN)

Jim Cramer issued a warning on X about potentially reducing U.S. computational capabilities for artificial intelligence. Responding to comments by Alibaba Group Holding Ltd. BABA Chairman Joe Tsai about a potential data center bubble, Cramer emphasized the critical importance of maintaining AI infrastructure. What Happened: "Now Joe Tsai says there's a bubble in data center building. Does China just want us to lose this lead?" Cramer wrote. He directly challenged the notion of scaling back U.S. computational resources, stating, "If you want to hobble the U.S. when it comes to robots and self-driving, then you need much more compute. It would be horrendous if the U.S. cut back." Cramer also noted the market implications, warning that Tsai's comments were pushing down NVIDIA Corp. NVDA stock and highlighting a "death cross" that emerged in pre-trading on Tuesday. The comments follow Tsai's recent remarks at the HSBC Global Investment Summit in Hong Kong, where he cautioned about reckless data center expansion. Tsai warned that tech firms and investment funds are building infrastructure without a clear customer base, stating, "People are talking literally about $500 billion [in projects]. I don't think that is entirely necessary." See Also: China's Milk Tea Chain Chagee Files For Nasdaq IPO Under 'CHA,' Taking On Starbucks In Growing Market Why It Matters: Supporting Cramer's perspective, Gene Munster from Deepwater Asset Management suggested that "the race to AGI should continue to drive infrastructure spending for the next few years." Goldman Sachs analysts further bolstered this view, predicting AI-related investments could generate $305 billion in revenue by the end of 2025. Major tech companies like Microsoft Corp. MSFT and Amazon.com Inc. AMZN continue to invest heavily in AI infrastructure, with Alibaba planning to invest over 380 billion yuan ($70 billion) in AI within the next three years. Price Action: Alibaba's ADR closed at $132.75, down 1.29% on Tuesday. In after-hours trading, it rose 0.16% to $132.96. Alibaba holds a 96.04% momentum rating and a 73.41% growth rating per Benzinga's Edge Rankings. The Momentum metric ranks stocks by price movement and volatility. For more insights, sign up for Benzinga Edge. Read Next: Sam Altman-Founded Worldcoin Network Beats Bitcoin, Ethereum With 11% Rally Amid Visa Partnership Reports Image via Shutterstock Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. AMZNAmazon.com Inc$206.001.35%Stock Score Locked: Want to See it? Benzinga Rankings give you vital metrics on any stock - anytime. Reveal Full ScoreEdge RankingsMomentum75.34Growth94.54Quality77.25Value48.39Price TrendShortMediumLongOverviewBABAAlibaba Group Holding Ltd$132.90-1.17%MSFTMicrosoft Corp$395.020.49%NVDANVIDIA Corp$120.61-0.66%Market News and Data brought to you by Benzinga APIs

Alibaba Chairman Joe Tsai Cautions Against US AI Industry 'Bubble' | PYMNTS.com

"People are talking about $500 billion, several hundred billion dollars," he said, per the report. "I don't think that's entirely necessary. I think in a way, people are investing ahead of the demand that they're seeing today." During an earnings call in February, the company said it would spend more on AI during that period than it has in the last decade as it pursues artificial general intelligence, a version of AI that can think and reason at or above the level of humans. "We aim to continue to develop models that extend the boundaries of intelligence," Alibaba CEO Eddie Wu said during the call. "Why is that the primary aim? Well, it's because all of the visible AI application scenarios today that we see around content creation, search, and so on and so forth have arisen precisely as a result of the ongoing extension of those boundaries, and we want to keep pushing out those boundaries to create more and more opportunities." "For us, this year is a story of scale -- scale of adoption, scale of use cases," Belinda Neal, the bank's chief operating officer of core engineering, head of product management and head of engineering partnerships, said in an interview with PYMNTS. "With generative AI, we've been really excited about some of the new potential of the technology to deliver efficiency and productivity benefits across the firm," Neal added.

Joe Tsai 'Worried' About AI Data Center Bubble Driven by National Ambitions Like President Trump's $500B Stargate

Alibaba Group Chairman Joe Tsai has raised concerns that massive data center investments like Stargate could lead to a bubble. | Credit: S3studio / Getty Images. With tech firms around the world investing billions of dollars to build new AI data centers, they risk getting ahead of themselves, Alibaba Group Chairman Joe Tsai warned on Tuesday, March 25. Tsai suggested that the enormous sums being thrown at AI infrastructure -- including a proposed $500 billion U.S. venture known as Stargate -- may overestimate future demand. American Tech Firms Getting Carried Away During a discussion at the HSBC Global Investment Summit in Hong Kong, Tsai acknowledged that AI growth would require significant data center investments. Alibaba itself plans to invest over $50 billion in new cloud infrastructure over the next three years. But compared to figures being floated in the U.S., $50 billion is modest. "I'm still astounded by the type of numbers that are being thrown around in the United States about investing in AI," Tsai said. "People are talking, literally talking about $500 billion, several hundred billion dollars. I don't think that's entirely necessary," he added. Noting that some projects have started raising funds without securing any uptake agreements, Tsai said he "start[s] to get worried when people are building data centers" based on assumptions about future demand. But if projected demand fails to materialize, he warned it could cause a bubble effect. Overcapacity Fears Although major cloud providers continue to invest billions in new data centers, there are signs that spending may be reaching a crest. In February, TD Cowen observed that Microsoft had canceled leases equivalent to "a couple of hundred megawatts" of capacity. The move was the first sign that cloud providers may be weary of oversupply. However, a face-value assessment based on announced capacity must be tempered with the reality that many projects won't make it across the finish line. Hype vs. Reality Ultimately, some of the most ambitious U.S. investment plans may prove to be hot air. Although Softbank, OpenAI and Oracle have pledged to invest $500 billion in Stargate, some have questioned whether that figure is realistic. For instance, Elon Musk claimed "on good authority" that SoftBank has only secured $10 billion of the needed capital. Meanwhile, in Asia, which is experiencing a data center building boom, Analysys Mason recently published a "data center hype index" to quantify the relationship between announced capacity and the actual capacity expected to be delivered. The analysis found that builders in Indonesia, Vietnam, the Philippines, and India were unlikely to realize most of the projects that have been announced, suggesting that concerns about oversupply in these markets may be premature.

Alibaba chair cautions AI investment bubble By Investing.com

Investing.com -- On Tuesday, Joe Tsai, Chairman of Alibaba (NYSE:BABA) Group, voiced his concerns regarding the surge in artificial intelligence (AI) investment in the United States, suggesting it might signal the onset of an investment bubble. Speaking at the HSBC (LON:HSBA) Global Investment Conference in Hong Kong, Tsai conveyed his astonishment at the massive financial commitments, such as the $500 billion Stargate joint venture involving OpenAI, SoftBank (TYO:9984) Group, and Oracle (NYSE:ORCL). Tsai criticized the current trend where companies are aggressively building data centers for AI without having secured customer agreements, a practice involving investment that exceeds current demand levels. He highlighted instances of data center firms constructing new facilities speculatively, indicating a potential misalignment between investment and actual market needs. Gene Munster, Managing Partner and Co-Founder of Deep Water Management, offered some analysis in a post on X, noting that Tsai's words contrast sharply with recent forecasts from US tech giants who increased their 2025 spending projections from 20% to over 40%. Munster believes these competing narratives may reflect regional differences between Chinese and Western markets rather than signaling an industry-wide slowdown. Despite these concerns, Munster maintains his conviction that the AI infrastructure buildout will continue as planned, supporting his prediction of an AI-powered bull market lasting at least two more years. In other news: a positive note for Alibaba's future growth, as Tsai announced that the company is set to resume hiring. This decision follows a significant meeting with Chinese President Xi Jinping and prominent figures in the Chinese tech industry. Tsai praised the meeting as a "very, very clear signal" that Beijing is encouraging businesses to reinvest and expand their workforce, marking a departure from the strict regulatory measures imposed four years ago which had dampened investment and led to job cuts across the sector. The conference with Xi Jinping, which also included Alibaba co-founder Jack Ma, is seen as a pivotal moment that signifies a warming of relations between the Chinese government and the tech industry. After years of a regulatory crackdown that stifled corporate expansion, Tsai's announcement of Alibaba's hiring plans reflects a newfound optimism and a green light for the industry to pursue growth and development.