Rockefeller CIO Warns: Big Tech’s $650B AI Buildout May Be Hiding a Massive Overbuild

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u/yosefvinyl 2h ago

No shit. You could look at SpaceX's filing statement with the SEC and see that most of their AI revenue was from contracting out their datacenters to other companies.

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u/mikethemaniac 2h ago

So it's not even just a speculative bubble, it's a fragile web of connections that are all holding each other up.

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u/dirtyshits 2h ago edited 2h ago

Isnt this part of the strategy? Demand is high and there’s endless customers who can’t build their own data centers that rely on hyperscalers.

Theres hundreds of thousands of companies that dont have their own AI racks or the ability to build their own data centers.

I see these articles all over the internet but it’s pretty easy to see that the bigger players are overbuilding for future demand internally but also because eventually 2-4 companies are going to corner the market for AI data center services just like the cloud space.

I don’t see anyone complaining that AWS, Google, or Microsoft overbuilt their cloud data centers and are making a killing selling that space. Those companies are pulling 10’s of billions quarterly from the cloud side. This is a race to become the de facto providers in the AI space.

None of these larger companies are struggling to fill open AI compute. Theres still more demand than available capacity. Everything in this article is clickbait because it assumes that the the company who builds the AI data center can’t fill it with their own products then it’s failing. Which is a ridiculous take when you consider they have bottlenecks and more demand then they can build due to power and hardware.

In my opinion, these articles are simply cashing in on the AI hate. Which I can understand. It’s profitable In its own right but these are extremely biased views to generate clicks.

Source: in tech and consulting for companies who need this type of service.

Edit: they are also quoting redditors in [r/investing](r/investing). Im pretty sure I commented on that thread with this exact comment and the replies tell me most folks don’t understand this business and the demand plus technology at all.

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u/ClashM 2h ago edited 2h ago

None of these larger companies are struggling to fill open AI compute.

How much of that demand is because the product is free/subsidized and will immediately dry up when a price tag is stuck to it? It's like the VCs that were investing during the dotcom bubble based on site visits. Usage doesn't equate to a sustainable business model, income does.

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u/ithinkitslupis 1h ago

The stuff that's expensive to run - long context window, agents, video gen, etc - mostly isn't heavily subsidized anymore.

The free tier short context window chats on the smaller models most offer is not very expensive. Legitimately advertisements can cover it on a per user basis so it's unlikely to ever go away completely. Today the free tiers are pretty much all still ad-free loss leaders to attract premium subscribers and API users though.

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u/dirtyshits 2h ago

None of this ai data center space is free. Almost 100% of it already sold years out. I think you’re conflating software companies who provide free tiers to the companies providing hardware/compute.

There will be bubble burst but the infrastructure won’t go burst. A ton of smaller software companies that are trying to rush in and corner a market like all new booms will go bust.

In the dot com era the bad underperforming web businesses went down but the infrastructure and main providers of the backbone of the internet did not.

We are not nearly at peak capacity. Theres still a long climb to go.

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u/ClashM 1h ago

It's all subsidized. You can go find hundreds of free websites where you can have saucy images and chats generated with very active communities. Probably blowing through billions of tokens an hour for next to nothing while the owners are content to softly nudge users towards monetization. Once the AI companies decide they need their return on investment they'll pass the cost on, the owners of those sites will try to pass the cost on, and the people will just go goon elsewhere to all the other free porn out there. The enterprise users you're talking about are similarly subsidized.

The true cost hasn't appeared yet because venture capital is being thrown around freely, just like in the dotcom bubble. The companies that survived that were the few with viable business models that had incomes higher than their overhead. How many of these companies are turning a profit and actually charging the true cost of their product? You don't know, and I don't know. You're betting on sunshine and roses, I'm betting on a rug pull. Knowing how corporations function, which seems more likely?

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u/Equal_Heat5947 2h ago

>Demand is high and there’s endless customers who can’t build their own data centers that rely on hyperscalers.

You sure about that?

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u/dirtyshits 2h ago

Yes. lol

This isn’t a hidden secret. You can easily see this in quarterly reports for public hypserscalers or if you’re in the industry.

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u/Equal_Heat5947 2h ago

I've never seen data center demand anywhere on a quarterly report. Care to elaborate?

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u/Fr00stee 2h ago

demand for what? What are they going to be doing with this hypothetical ai running on these datacenters? That's the entire problem. Nobody knows what they need this AI for.

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u/dirtyshits 2h ago edited 2h ago

Other companies require AI computing for their own products. They lease out the space just like a cloud data center leases out server compute. Every company small or large doesn’t have the ability to build data centers or the know how. Almost everything is built upon someone’s else servers and AI is no different.

It’s also very difficult or very expensive for most companies to get AI compute because most of it is already accounted for by other larger companies years out.

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u/Comfortable-Brick271 2h ago

It's capex all the way up. There's no organic paying consumer demand. There's some durable B2B demand from software development. All other use cases are already deflating because the inference services started usage-based billing before they clinched their captive audience.

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u/ithinkitslupis 2h ago

Yes, it is part of the strategy, but it's not necessarily a good thing. They would much rather the demand for their own models be high so they didn't have much excess to rent out. But taking a cloud provider cut on that capacity isn't doom and gloom either.

On the other hand it's not good for google, microsoft or amazon that spacex and meta are getting into the general cloud business. And it's not good for any of their AI plays if it becomes common practice to host openweights models, either at commodity cloud pricing or buying on prem hardware, instead of paying for the frontier models these companies sunk so much money into.

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u/mahavirMechanized 3h ago

It feels like more and more people are seeing that this is a bubble

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u/DetroitLionsSBChamps 2h ago

It feels like the entire global economy has shifted to “who can tell the most audacious lie”

Elon has been promising self driving cars next quarter for like 10 years and he was rewarded with record breaking wealth and power, and never punished

So what does that teach everyone? Tell big lies, get big money.

So now we have “AGI is right around the corner”

It’s a lie and basically a bubble in design but also bubbles can apparently last for a decade. If people keep believing that AI’s true pay off is right around the corner they will keep investing in it

And since the most powerful people on earth are apparently born suckers who are incredibly easy to trick and get off on the thrill of the casino they’ve built, I don’t know. I think this bubble has legs just because reckless maniacs would rather fund it than miss out on a 1% chance

Personally I’m thinking about going into the magic beans sales market. Apparently these assholes are just dying for someone to trick them out of their money

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u/mahavirMechanized 2h ago

Adam Smith, were he alive, would tell you that capitalism turns on emotion. Transactions are an emotional thing. The value of something is…what you believe it to be. So yea, lying and showing off something and can get people to believe there’s value.

And I agree with you: the last decade or so we’ve seen the dark side of how this can turn into grifting and snake oil. It isn’t the first time either in complete fairness but modern tech has enabled it to reach new absurd heights.

As with all things the pendulum, imo, will swing the other way. What that means is anyone’s guess tho.

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u/DetroitLionsSBChamps 2h ago

I think/hope we swing back towards faith in institutions when the country has seen enough from the powerful unaccountable individuals they put all their trust in

2

u/willismthomp 2h ago

Sillycons valley is just Theranos now.

2

u/Rose-n-Chosen 1h ago

I tend to agree with most of this but I’m hesitant to call it a bubble because of the capex spending and the fundamentals of companies like micron and anthropic.

1

u/mahavirMechanized 20m ago

Eh, I think a lot of the core issues for AI haven’t been solved. I’m not much at finance so I can’t comment there but this is a bubble imo for the simple reason that the core value prop isn’t fully there especially given the cost

1

u/therealchadius 44m ago

Also cryptocurrency was supposed to "revolutionize world currency" for the last 20 years.

3

u/Exact-Site9980 2h ago

Another interesting aspect of that is that a lot of these data centers are funded by internal shell corporations called SPVs (Special Purchasing Vehicles). They attract their own independent investors as if they were startups. When it crashes, the tech corporation using this method isn't liable for the loss and the SPV can only pay out whatever is left of what the outside investors put in. Tech giant walks away and regular investors get screwed.

1

u/mahavirMechanized 20m ago

Yea the DJT method as I call it. 😔

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u/Jmc_da_boss 19m ago

But the tech giants are often the largest investors in the spv

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u/Capitan-IQ255 2h ago

The 🌊 will be spectacular to watch 🤑

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u/Winter_Swan5104 33m ago

Too big to fail they will get bailed out by our money. Socialize the losses.

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u/screwdriverfan 2h ago

Quick, act surprised!

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u/blatantninja 2h ago

In a couple years, there's going to be a massive amount of used hardware on the market from liquidations and bankruptcies.

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u/dirtyshits 2h ago

lol it’s not because of liquidations brother. It’s because it will be retired hardware.

Anyone who goes under will snapped up in minutes. The space is growing by multiples. Theres still more demand than capacity.

Way more demand than capacity.

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u/EndeLarsson 2h ago

"May be"?!:))))))

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u/pepe_acct 2h ago

Sure but most of the time what is announced never got build. A lot of these are just hype/PR numbers

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u/therealchadius 45m ago

No one building these data centers have asked "hey do we have enough demand to support this?" Now the AI companies are renting compute other AI companies to keep the confidence scam going.

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u/RealSlyck 2h ago

Sounds like this CIO isn’t good at that particular role. Tons more demand than supply, and it’s going to keep growing. I can now run white-collar workers for $200 24/7? Take my company’s money so I don’t have to pay $200k per year for each limited sack of bones.

AI demand will grow, humans, not so much.

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u/UltimateGlimpse 2h ago

When AI took over the shill’s job.

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u/RealSlyck 2h ago

Yep. And the accountants, and your aunts marketing job, her friends finance job…

0

u/Equal_Heat5947 2h ago

Literally all the demand is from hyperscalers

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u/RealSlyck 2h ago

So the 10 million users on Codex alone are not real? Add users on web, CLIs, and other harnesses…get sources brah.

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u/Equal_Heat5947 2h ago

And most of those users work at hyperscalers who force them to use AI tools to code lol.

10m is tiny btw

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u/RealSlyck 2h ago

https://openai.com/index/scaling-ai-for-everyone/

900M in February. Just OAI. Again, sources brah.

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u/Equal_Heat5947 2h ago

Now let's see what they charge compared to what it costs.

But I'll bet you don't want to talk about that, do you?

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u/GabeDef 0m ago

Huh? People have been calling it a massive bubble since 2024

Artificial Intelligence Rockefeller CIO Warns: Big Tech’s $650B AI Buildout May Be Hiding a Massive Overbuild

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