Posted on 12/04/2025 7:29:58 PM PST by SeekAndFind
While giant tech companies like Google and Amazon tout the billions they’re pouring into AI infrastructure, IBM’s CEO doubts their bets will pay off like they think.
Arvind Krishna, who has been at the helm of the legacy tech company since 2020, said even a simple calculation reveals there is “no way” tech companies’ massive data center investments make sense. This is in part because data centers require huge amounts of energy and investment, Krishna said on the Decoder podcast.
Goldman Sachs estimated earlier this year that the total power usage by the global data center market stood at around 55 gigawatts, of which only a fraction (14%) is dedicated to AI. As demand for AI grows, the power required by the data center market could jump to 84 gigawatts by 2027, according to Goldman Sachs.
Yet building out a data center that uses merely one gigawatt costs a fortune—an estimated $80 billion in today’s dollars, according to Krishna. If a single company commits to building out 20 to 30 gigawatts then that would amount to $1.5 trillion in capital expenditures, Krishna said. That’s an investment about equal to Tesla’s current market cap.
All the hyperscalers together could potentially add about 100 gigawatts, he estimated, but that still requires $8 trillion in investment—and the profit needed to balance out that investment is immense.
“It’s my view that there’s no way you’re going to get a return on that, because $8 trillion of capex [capital expenditure] means you need roughly $800 billion of profit just to pay for the interest,” he said.
Moreover, thanks to technology’s rapid advance, the chips powering your data center could quickly become obsolete.
“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.
(Excerpt) Read more at fortune.com ...
Except Google is one of the most profitable companies on the planet, despite massive spending on AI and AI chips.
They make their own AI chips, unlike most other AI companies.
Another arrogant H1-B wants to tell Americans how to live.
I often work in a data center. I can tell you that plenty of hardware gets used after five years. A lot of it (wires, routers, switches, cabling) can last much longer. Of course, the old chips will just keep on doing what they do, just not as fast. The IBMs who don’t invest in it at all will wind up leasing it from those that do, or lose business.
I do not buy into this idea that AI is going to turn the world upside down in ten years. But it will have a role, and people will figure out a way to monetize it.
When Facebook/Meta went public, the math didn’t work out for the amount being capitalized. Tesla and nVidia’s capitalization relative to competitors do not seem to be connected to reality, and yet, there they are. No one talk’s about the ability of Meta to make money for stockholders even after a decline in the use of some of its core products.
The upfront costs of AI is huge. However, once it is established, the income from it is forever.
I have heard there will be satellite, solar powered data centers that will reduce cost greatly.
Anyone who thinks Amazon and Google aren’t getting subsidized by the intelligence agencies hasn’t been paying attention.
After 5 years, a used NVIDIA RTX 3090 graphics card is still useful and still worth about 50% of its capital cost. It’s time for Arvind Krishna to go back to India and start a sour grape farm.
Google CEO is an Indian probably came with H1-B visa.
RE: Google CEO is an Indian probably came with H1-B visa.
I asked ChatGPT about Indian CEO’s of American companies. Here we are:
Some prominent Indian‑origin CEOs:
Sundar Pichai – CEO, Alphabet & Google.
Satya Nadella – CEO, Microsoft.
Shantanu Narayen – CEO, Adobe.
Arvind Krishna – CEO, IBM.
Sanjay Mehrotra – CEO, Micron Technology.
Nikesh Arora – CEO, Palo Alto Networks.
Vasant (Vas) Narasimhan – CEO, Novartis.
George Kurian – CEO, NetApp.
Jayshree Ullal – CEO, Arista Networks.
Raj Subramaniam – CEO, FedEx.
Leena Nair – CEO, Chanel.
Shailesh Jejurikar – announced CEO, Procter & Gamble (from 2026).
PepsiCo did have a very prominent Indian‑origin CEO: Indra Nooyi, she eventually retired and was replaced by .... amon Laguarta, a Spanish businessman, so the company is no longer led by an Indian‑origin chief executive.
These are only a selection; current estimates suggest dozens of Indian‑origin CEOs across the Fortune 500 and other global blue‑chips.
For a normal user, yes. For the Great AI race, no. The current ‘RAM apocalypse’ as AI companies soak up all the GPU and DRAM supply in the market is part of that. Any AI company using a critical part that is 5 years old is not a competitor.
On the other hand, a home user with a 5 year old critical component is totally ok. Some computer nerd using a four year old RTX 3090 for 4K gaming is probably ok for the next two or so years. He may not have a choice anyways considering how prices for newer tech have shot up as all capacity is soaked up (DDR5 prices have shot up 600% in some cases).
A multi-billion dollar company competing against other American and non-American multi-billion dollar companies in a multi-trillion dollar industry? Where the likes of ChatGPT are calling a code red emergency after the realization that they took their eye off the ball and the likes of Gemini 3 have become far better competitors.
Not so much, but I am sure you knew that.
FR is a political website and thus most of our views have strong political hues that are not necessarily based on reality. Thus, the angst is more in the Indian CEO than having companies use obsolete (obsolete) hardware for their specific use cases (specific use cases).
Interesting. I’ve been saying the same thing. Very hard to make a decent rate of return on such a massive and fast CAPEX program. There are only two industries I know of that have similar spend patterns, Oil and Gas and Movie making. Oil and Gas often settles for moderate rates of return and very good cumulative MOD funds flows through the out years. If you don’t get your money back fast you would be better off putting in in a bank.
These things look like Ponzi territory to me and NVIDIA are the ones making the real ROI.
“an investment about equal to Tesla’s current market cap” with a PE of at least 250. Lots and lots of blue sky built into that market cap.
Pichai joined Google in 2004, where he led the product management and innovation efforts for Google Chrome, ChromeOS, as well as being largely responsible for Google Drive.
He went on to oversee the development of other applications such as Gmail and Google Maps.
In 2013, Pichai added Android to the list of Google products he oversaw.
In 2015, Google CEO Larry Page selected Pichai to become the next CEO of Google after previously appointing him Product Chief.
I keep seeing comments here and elsewhere to the effect that the potential is a straight-line straight up, with no negatives. Will everybody get a pony as well?
I see nothing but negatives, on this side of eternity. If this were heaven and the New Earth, I would be a fanatic about this, because we would be freed up from labour to pursue our passions.
However, I believe the universal basic income, they are selling us on to get AI in control of society, will only be temporary and they will get around to cutting off support for everybody but the chosen.
America is the modern day Rome and that’s where Rome went in its last days. The elites supported the people, until they didn’t.
Agreed.
In addition money is fungible—so any .gov contracts awarded to these companies means the taxpayers (as well as increases in .gov debt) are funding this activity.
Good observations and points, and yes, much of the anger towards Indian CEOs is from millions of Americans losing their jobs to H1Bs, not based on merit, but on price, damn the quality. India does not have some special talent for producing CEOs. The motivation for the Indian CEO pipeline is because they WILL lay off Americans.
Pony and ice cream.
” that’s where Rome went in its last days. The elites supported the people, until they didn’t.”
well, that was the Roman republic - pre-Augustus.
they got so many slaves in the 150 to 50 BC that the elite used slaves to farm their lands, eliminating the farmers who were the bread and butter of the Roman republic.
Do you mean the republic?
because the Principate lived on for another 300 years until Diocletian when it became the Dominate.
The principate (most of classical single Rome) decayed in the 3rd century due to
1. over-extension under Trajan
2. Conversely, it was no longer a “resource grabbing” empire and ran out of enemies to grab land from
3. Internal demonization and economic collapse
4. No defined political continuation - unlike the Republic
The principate was replaced by the Dominate - where the “Emperor” gave up being called “Princeps” i.e. “First citizen” and gave up the pretense of being “one of the people” but became clearly “God’s representative on earth” - L’etat c’est moi!
The Dominate survived for 1100 years. it collapsed due to internal infighting. It had a number of external enemies, but had survived the Germanics, the Avars, the huns, the Slavs, the Bulgars, the Arabs, etc. but did not create a stable dynastic succession.
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