[HN Gopher] The murky economics of the data-centre investment boom
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The murky economics of the data-centre investment boom
Author : 1vuio0pswjnm7
Score : 70 points
Date : 2025-10-07 18:52 UTC (4 hours ago)
(HTM) web link (www.economist.com)
(TXT) w3m dump (www.economist.com)
| rzk wrote:
| https://archive.is/5CY26
| dgfitz wrote:
| Sure seems like a combination of TINA and massive amounts of
| hope.
| jjcm wrote:
| It's a long-term gamble but a short-term win.
|
| In almost all scenarios, a setup with this incentive structure
| will lead to massive adoption. It's too tempting, and with most
| jobs / political positions being short term (<5yrs) ones, people
| optimize for their time in that timeframe, not longer.
|
| Boards will pursue stock buybacks (short term growth, long term
| may cause trouble if there's a downturn), banks will lend out
| subprime mortgages (hit your sales numbers in the short term, at
| the cost of long term risk), etc etc.
|
| This situation is no different. There's money flowing in and
| there's less red tape since everyone is being pressured to allow
| it. It might work out in the long term, it might not, but it will
| 100% benefit those who push it in the short term. People will get
| promoted for driving a new data center, politicians can promote
| more jobs being added, everybody wins... for now.
|
| The future economic aspect becomes irrelevant when the short term
| candy is sweet enough.
| jpster wrote:
| IBGYBG. "I'll be gone, you'll be gone". Infamous email sign-off
| associated with the run-up to the Great Financial Crisis. Used
| by Wall Streeters asking analysts to inflate credit ratings for
| undeserving securities, backed by risky mortgages.
| bdbdkdksk wrote:
| Ed Zitron writes about this constantly:
| https://www.wheresyoured.at/the-case-against-generative-ai/
|
| All of the big players - Nvidia, OpenAI, Oracle, Microsoft - are
| in insane circular financing agreements that would make Enron
| executives blush.
| neffy wrote:
| Feedback loops. Always with the feedback loops.
| mclanett wrote:
| Wow this is quite a rant.
|
| However Zitron seems to have forgotten that Google exists or
| makes TPUs. He mentions Google only 10 times in the entire
| article, always in a minor way.
| combyn8tor wrote:
| Meanwhile in Australia we have a "AI data centre" startup being
| valued at $1.9 billion and given $330 million to play with,
| having not built anything yet. It's co-founded by a guy that went
| to prison for insider trading. His wife is also an investor, who
| happens to be a prominent Australian influencer. The company
| previously focused on Bitcoin mining but have pivoted to the AI
| boom, claiming their cooling systems to be 60% better than
| competitors. Their first project will kick off soon in the
| Australian state of Tasmania, where there is nothing much more
| than sheep and tourists.
|
| https://www.smartcompany.com.au/startupsmart/firmus-raises-3...
| pkaye wrote:
| Is there a lot of power generation in Tasmania? That is the
| main criteria for AI data centers from what I heard. Latency is
| less critical than cost of power.
| matt_daemon wrote:
| Plenty of power and it's almost always renewable: https://exp
| lore.openelectricity.org.au/energy/tas1/?range=7d...
|
| There's also plenty more there than sheep and tourists (and
| not really that many of those)
| decimalenough wrote:
| There's pretty national parks, convict history and some
| pretty tasty whiskeys and wines, but not a whole lot of
| reasons to build a data centre. The power argument isn't
| particularly compelling either, because it's much more
| sunny on the Australian mainland.
| bdangubic wrote:
| > where there is nothing much more than sheep and tourists
|
| kind of like Mississippi but without the tourists part
| greenie_beans wrote:
| people have the weirdest/wrong perceptions of mississippi
| pixl97 wrote:
| It's more like "it's like the US, but without the
| education"
| greenie_beans wrote:
| punching down on a state you don't understand or know
| anything about is such a overdone trope. at least be
| funny!
| cowboylowrez wrote:
| ok how bout this, its all relative except for
| mississippi, there's too much going on between relatives
| there.
|
| get it? hahahaha
| quickthrowman wrote:
| When you come in dead last (or in the bottom 5 states) in
| virtually every possible positive metric, people are going
| to make negative assumptions. I understand the historical
| reasons for that, but it doesn't change what it is.
| greenie_beans wrote:
| fair enough, but their assumption wasn't even about that.
| a better joke on that quote would've been about vermont.
|
| i hear people online punch down on mississippi all the
| time, and often they don't know anything about the state
| except whatever metric they've heard about from a
| headline. the rest of america isn't very far behind, and
| if you think the state of mississippi isn't a product of
| america as a whole then you are extremely mistaken.
| without the industrialized north you have no plantation
| economy and without the civil war you have no "dead last
| (or in the bottom 5 states) in virtually every possible
| positive metric."
|
| i grew up there, attended public school all the way
| through my BA, and then spent significant time as a young
| adult there. based on the stereotypical assumptions, it
| might be shocking to the big brains on hacker news that
| somebody from mississippi is an audience of this website.
| sukhdeeppravish wrote:
| True. As an AI engineer from Gurajatar, Uttar Pradesh I
| can relate to your experience in this auspicious website
| sir. We are top human capital.
| quickthrowman wrote:
| > i hear people online punch down on mississippi all the
| time, and often they don't know anything about the state
| except whatever metric they've heard about from a
| headline. the rest of america isn't very far behind, and
| if you think the state of mississippi isn't a product of
| america as a whole then you are extremely mistaken.
|
| Agreed, people usually just say 'lol MS is full of
| idiots, they're bad at school' instead of taking the time
| to understand why. It was more isolated than GA and LA
| (and AL), there was a higher ratio of slaves to freedmen
| in the antebellum period, the Delta was undeveloped so
| lots of impoverished people from across the south moved
| there to try and develop the land, to name a few reasons.
|
| > i grew up there, attended public school all the way
| through my BA, and then spent significant time as a young
| adult there. based on the stereotypical assumptions, it
| might be shocking to somebody on hacker news that
| somebody on a similar enough intelligence level to be an
| audience of this website is from mississippi.
|
| I can say that I don't assume everyone from Mississippi
| is stupid, but the generalization about Mississippi that
| you related seems to be more common than it should be. I
| think a lot of it has to do with a lack of exposure to
| people from Mississippi or Mississippi itself.
|
| Thanks for taking the time to respond, I appreciate the
| discussion.
| Hansappreciator wrote:
| Signs of a bubble in this sector are everywhere. OpenAI is
| trying to fundraise a $5tn infrastructure buildout on $15bn in
| annual revenue. That's insane.
|
| What's worse is that OpenAI and the other AI companies are all
| intertwined. The chipmakers are invested in the datacenter
| operators are invested in the software guys. When the bubble
| implodes - and it will implode - the good will go down with the
| bad, and that's what makes a financial crash a true crash.
| bob1029 wrote:
| The AMD/OpenAI deal sounded like the music stopping to me.
| theteapot wrote:
| Tasmania doesn't do much sheep farming. They are more into
| salmon. Maybe you were make a derogatory reference to the local
| human population? Fair enough.
| kelp6063 wrote:
| Unless the AI industry can figure out how to be profitable soon
| (to which basically nobody has a clear path to profitability
| besides maybe ad revenue) it's hard to see this not blowing up in
| a year or two. The bills for all of this are going to come due
| eventually and the AI CEOs can only convince investors to keep
| letting them burn billions for so long.
| mwkaufma wrote:
| >> Cheerleaders such as Sam Altman, OpenAI's boss, argue that the
| risks of underbuilding are at least as serious as those of
| overbuilding, because of the long-term economic potential of
| generative AI.
|
| Pure hucksterism.
| kgwgk wrote:
| https://www.bloomberg.com/news/articles/2025-10-07/oracle-si...
|
| Oracle Sinks on Report Its Cloud Margins Are Lower Than Expected
|
| Jeran Wittenstein October 7, 2025 at 6:06 PM GMT+2
|
| Oracle Corp. shares tumbled after a report that the software
| maker's profit margin in its cloud computing business is lower
| than many on Wall Street have been estimating.
|
| While Oracle generated roughly $900 million in revenue from the
| rental of servers powered by Nvidia Corp. chips during the three
| months ended in August, the company only managed about $125
| million in gross profit, the Information reported, citing
| internal corporate documents.
| dnw wrote:
| I wonder how much of this round tripping is because there are
| only a few companies that have the demands and can meet those
| demands...
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