The rapid increase in AI optimism has catalyzed a global boom in data center construction, however, this trend could exacerbate risks if the industry experiences a sudden correction. The Bank of England recently highlighted rising financial dependence on AI, particularly in its analysis released on the 24th, which warned about the potential consequences of over-leveraging in this sector.
AI data centers are projected to require approximately $5.2 trillion in investments by 2030, raising alarms about the mounting debts companies may incur to meet this demand. If the AI market were to face a major correction similar to the dot-com bubble, banks lending to data centers might suffer substantial losses, potentially leading to broader economic instability. The Bank is currently scrutinizing the scale of loans within the data center industry and the financial interconnections among key corporations.
Experts believe that the overwhelming energy demands of AI data centers necessitate massive investments in the energy sector. The reliance on vast quantities of essential resources such as microprocessors and copper could render these centers as ‘historically expensive white elephants’ in the event of an economic downturn. The bank has emphasized that declines in AI asset values could impact financial stability through multiple channels, necessitating a reassessment of the dependence on debt-driven expansion in AI infrastructure.
👉 Pročitaj original: CIO Magazine
