Significant investments are being made in the artificial intelligence (AI) industry, but warnings have emerged that overinvestment issues similar to those seen in the past with railroads and the internet could arise.
In a column published on October 18, James Mackintosh, a columnist for The Wall Street Journal, pointed out that there is no evidence to suggest that the current AI investment boom can avoid the problems that occurred during previous large-scale capital investments. He referenced the phrase 'this time it's different,' which legendary investor John Templeton identified as one of the most dangerous expressions in investing, noting that profits from the surge in data center construction may be temporary and could lead to a stock market bubble burst.
Mackintosh cited historical examples of overinvestment, including the British railway investments of the 1840s and the fiber optic network build-out during the dot-com bubble in the early 2000s. While these investments brought substantial benefits to society, they often resulted in disappointing outcomes for investors due to prolonged timelines for realizing profits and intensified competition that shifted benefits from companies to consumers.
This warning suggests that similar scenarios could unfold in the AI industry.
Professor Steyn van Nieuwerburgh from Columbia Business School recently estimated in a Brookings Institution report that AI-related investments in the United States could reach a total of $9 trillion by 2032. This figure represents 3.2% of the U.S. gross domestic product (GDP) and is projected to be the largest capital investment project in U.S. history.
He noted that if the economic value of AI technology does not match the substantial capital invested in data center construction, a significant portion of the investment may not be recovered.
Mackintosh attributed last week's sharp decline in AI stocks to high inflation, which has raised the cost of financing investments, thereby increasing threats to the AI investment boom. The stock price of data center operator CoreWeave plummeted 24% last week, erasing all its gains for the year, while Micron fell 11%. Samsung Electronics and SK Hynix also saw declines of 17.8% and 24.3%, respectively, marking their worst weekly drop since the 2008 financial crisis.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.