There is no AI bubble and the “astounding” surge in capital spending is being driven by anticipated future computing demands, the chairman of Alibaba Group has said.
“If you look at the right now, [there is] massive amount of capex investment that all the hyper-scalers, all the model companies, are making,” Joseph Tsai said in conversation with UAE's Omar Al Olama, Minister of State for AI, Digital Economy and Remote Work Applications, on day two of the World Governments Summit in Dubai.
The latest quarterly reports show companies are doubling their spending, from between $60 billion and $80 billion per company last year to $120 billion-$150 billion now, Mr Tsai said.
It's “astounding” how, in just a year, capital investment had surged so sharply, driven largely by the fact that “people still believe in the scaling law”.
He said on Wednesday during a panel discussion that was also attended by venture capitalist Chamath Palihapitiya, founder and managing partner of Social Capital.
Global capital investment into AI including data centres is set to hit $539 billion this year, up 36 per cent annually, and is expected to climb to $629 billion next year, according to a report by US Investment bank Goldman Sachs.
Bank of America projects the investment figure to be even higher, reaching $641 billion in 2026 and $739 billion next year, as companies worldwide continue to invest in AI and cloud infrastructure while governments and businesses race to incorporate the technology into every aspect of daily life.
Much of the anticipated capital investment, Mr Tsai said, will go into inference-time scaling, which refers to dedicating more computational power to the inference phase to improve the accuracy and reasoning capabilities of AI models.
Companies are also investing heavily in making models that deal in generative rich media: videos and images that use a lot of GPU resources.
“People seeing this scaling law and multi-modal world … and that's, I think, the validation that there will need to be more compute that needs to be invested in,” Mr Tsai said. These trends are unlikely to “reverse or veer off” in the future, and in that sense, “there is no bubble”," he said.
“People are investing, anticipating future demand."
He said there was still no clear return on investment despite the massive capital being poured in. “I hate to be the chief financial officer of one of these companies, because they have to … explain ROI to investors [and] they can't do that,” he added.
