AI Firms Spend Billions On Data Centers As Losses Mount And Valuations Soar

Benzinga

AI firms are spending billions on data centers but struggling to turn profits as costs soar and hardware ages fast. Analysts warn of a looming shakeout, comparing today’s AI boom to the dot-com bust, with only a few likely to survive.

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00:00It's Benzinga bringing Wall Street to Main Street.

00:02AI companies are pouring billions into data centers to power massive models,

00:06but returns remain elusive according to Futurism.

00:09Despite soaring valuations, including NVIDIA's $4.5 trillion market cap,

00:13most AI firms are losing money.

00:15Wall Street Journal described the sector as brutal economics,

00:18with both large and small players facing mounting losses.

00:21Costs are driven higher by efforts to fix hallucinations through reinforcement learning,

00:25as well as growing demand for resource-heavy tools like OpenAI's Sora 2.

00:30Researchers warn that AI data centers deteriorate quickly regarding continual maintenance,

00:34as hardware becomes obsolete under heavy use.

00:36Analysts predict only a few AI firms will endure a potential industry collapse,

00:41similar to the limited survivors of the dot-com bust.

00:43Investors expect only a few AI companies to profit from the current spending surge,

00:47with most likely to fail under unsustainable industry economics.

00:51For all things money, visit Benzinga.com.

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