As tech companies pour trillions into AI datacenters, a hedge fund founder has issued a stark warning: these new assets will depreciate twice as fast as the revenue they generate. This highlights a critical, often-overlooked risk in the “incredible” $750bn spending spree by tech’s “hyperscalers.”
The warning from Harris Kupperman suggests that the “very quickly depreciating assets” being built may not hold their value long enough to justify their cost. This is especially true for the “speculative” projects being funded by private credit. Gil Luria of DA Davidson echoed this, noting that lenders may be “improperly assessing the risks” of funding this “unproven category.”
This rapid depreciation is a financial time bomb, especially when combined with a $1.5 trillion funding gap for the $3tn global build-out. This gap is being filled by “shadow banking” sources, which are now financing assets that could halve in value before the loans are repaid.
These concerns are mounting despite the market’s AI euphoria, which has seen Nvidia’s valuation top $5tn and Google’s parent company report a $100bn quarter. The spending continues, with 10GW of new datacenter capacity—a third of the UK’s power demand—expected to start construction this year.
The problem is compounded by an MIT study showing 95% of firms are getting zero return on AI pilots. If revenue doesn’t show up, and the assets depreciate as quickly as warned, the $3tn boom, built on a mountain of debt, could collapse under its own weight.
