Bridgewater warns Big Tech's reliance on external capital to fund AI boom is 'dangerous'
FILE PHOTO: Figurines with computers and smartphones are seen in front of the words "Artificial Intelligence AI" in this illustration taken, February 19, 2024. REUTERS/Dado Ruvic/Illustration/File Photo
Dec 15 : The AI spending boom is entering a "dangerous" phase as Big Tech firms increasingly tap external investors to cover mounting costs, a top executive at hedge fund giant Bridgewater Associates said on Monday.
The warning underscores the degree of unease rippling through markets as several investors have begun to question the sustainability of massive capital spending on AI.
While the technology has deeply permeated the economy, critics are beginning to wonder how severe the fallout could be if the boom fails to translate into tangible profits.
"Going forward, there is a reasonable probability that we will soon find ourselves in a bubble," Bridgewater's Co-Chief Investment Officer Greg Jensen wrote in a note.
With costs rising beyond what internal cash flows can support, companies are turning to outside sources of funding to pursue their ambitions.
A UBS report last month said AI data center and project financing deals surged to $125 billion until November this year, from $15 billion in the same period in 2024.
The latest bout of anxiety over the AI trade was sparked by Oracle's weak sales and profit forecasts for the third quarter, issued last week.
Jensen said the surge in demand for computing power would need an unprecedented physical buildout of data centers, which faces many constraints.
At the same time, valuations across the AI ecosystem have soared, and the U.S. economy is becoming increasingly concentrated around the technology, he added.
