AI data centers are a disaster
2025-10-13 18:02:45.676564+02 by Dan Lyke 0 comments
AI Data Centers Are an Even Bigger Disaster Than Previously Thought
This AI skeptic got feedback from the industry - and now he's even more pessimistic
The initial article by Harris "Kuppy" Kupperman: Global Crossing Is Reborn…
Now, I think AI grows. I think the use-cases grow. I think the revenue grows. I think they eventually charge more for products that I didn’t even know could exist. However, $480 billion is a LOT of revenue for guys like me who don’t even pay a monthly fee today for the product. To put this into perspective, Netflix had $39 billion in revenue in 2024 on roughly 300 million subscribers, or less than 10% of the required revenue, yet having rather fully tapped out the TAM of users who will pay a subscription for a product like this. Microsoft Office 365 got to $ 95 billion in commercial and consumer spending in 2024, and then even Microsoft ran out of people to sell the product to. $480 billion is just an astronomical number.
His revised post: An AI Addendum
However, if you speed up the depreciation curve to something in the three to five-year range, it would imply that my prior breakeven revenue number of $160 billion to justify 2025’s capex spend, is woefully inadequate. In reality, the industry probably needs a revenue range that is closer to the $320 billion to $480 billion range, just to break even on the capex to be spent this year. As I wasn’t educated on the intricacies of a datacenter, I wasn’t bearish enough on the economics of an AI datacenter. No wonder my new contacts in the industry shoulder a heavy burden—heavier than I could ever imagine. They know the truth.
Further down as he draws parallels to the AI boom he talks about Lucent and Nortel lending to and taking equity stakes in their customers to keep prices propped up during the fiber boom.
Aside: in that first essay he points to These Shareholders Must All Be Stoned…, in which he talks about the collapse of the cannabis industry (in Canada) after legalization, when the product becomes a commodity. As LLM capabilities max out and everyone's offering a switchable language model back end to their fronting products... well... there's some interesting thoughts about capture there.
Among other places, Via.