ALT The point of this two-part Hater’s Guide To AI Debt was to show you exactly how ridiculous this all is, and how wrongheaded and dangerous the surge of investment was from the very, very beginning. As I said at the beginning, everything has been priced for perfection, but the truth is that everything requires perfection for this to work out. This is an industry that needs hundreds of billions of dollars’ worth of debt to build the most ambitious infrastructure projects of all time for a customer base predominantly made up of unprofitable, unsustainable companies, and under even the best case scenarios, said customers will have to be able to afford hundreds of millions or billions of dollars a year in cloud compute.

ALT I honestly don’t believe the vast majority of data center capacity actually gets built, and in turn do not expect the vast majority of data center debt to get repaid. I do not believe anybody is taking the severity of this problem seriously — I believe that upwards of 70% of all data center debt is left unpaid, and due to the continual use of non-recourse loans, it’s likely that many investors are left with whatever scrap GPUs can be sold for, because once the market is flooded, they’ll only be good for what copper and gold can be stripped from them. I try not to be too alarmist, but I can’t see how we avoid this becoming one of the greatest and most-destructive asset bubbles in history, one that precision-targets asset managers and big banks that believed that every number would always go up, and that “all useful compute will be sold.”

ALT Even before a crisis begins, the cost of building one of these things is increasing at such an alarming rate that even if the most-recently-funded projects get built, they face an impossible payback schedule even if they have consistent clientele. I am genuinely shocked that so few people are discussing the brittle economics of what is meant to be the next industrial revolution. In the end I think it might end up being completely unprecedented — like if the Great Financial Crisis left thousands of ultra-expensive apartment buildings with cupboard-sized rooms under the belief that human beings were about to get dramatically smaller. It sounds ridiculous, but in retrospect, I think that idea will seem magnitudes smarter than buying so many NVIDIA GPUs.