An AI-fuelled data centre bubble in the making? Not in Asia

In global stock markets, worries about the economic damage from US President Donald Trump’s tariff blitz seem like a distant memory. The overriding concern in the past few months has been the threat of a bubble in artificial intelligence (AI).

In Bank of America’s latest monthly global fund manager survey, an AI equity bubble was cited as the top “tail risk”, posing a bigger threat than the resurgence of inflation. Although various factors are at play, the issue that most perturbs investors is the mismatch between the unprecedented sums of money being spent on computing power and data centres and the relatively meagre revenues from AI companies and services.

Morgan Stanley forecasts a staggering US$2.9 trillion of capital expenditure on data centres worldwide between 2025 and 2028. Despite that, total revenues from the generative AI market this year are expected to reach only US$30 billion, according to S&P Global Market Intelligence. Many analysts see a significant risk that AI fails to generate the revenue needed to justify the massive investment in data centres, resulting in overbuilding and an overhang of stranded assets.