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Trillions of dollars are flowing into the data centers needed to power artificial intelligence, and Wall Street is paying close attention.
Nvidia’s stock fell 3 percent overnight after it revealed last month that, despite strong overall revenue, its quarterly equipment sales to data centers had missed analyst expectations.
Conversely, Oracle saw an 43 percent stock pop last week — its largest one-day jump in over 30 years — after announcing that OpenAI had agreed to buy $300 billion in computing power from the company.
“How does the digital economy exist?” said John Medina, a senior vice president at Moody’s, who specializes in infrastructure. “It exists on data centers.”
U.S. data center demand, driven largely by A.I., could triple by 2030, according to McKinsey, which would require data centers to make nearly $7 trillion in investment to keep up. OpenAI, SoftBank and Oracle recently announced a pact to invest $500 billion in A.I. infrastructure through 2029. Meta and Alphabet are also investing billions. Merely saying “please” and “thank you” to a chatbot eats up tens of millions of dollars in processing power, according to the OpenAI’s chief executive, Sam Altman.
As skepticism rises about the financial return of A.I.,some investors are looking at the performance of data centers as an early indicator of emerging headwinds.
“I start to see the beginning of some kind of bubble,” Joe Tsai, chairman of the e-commerce giant Alibaba Group, said in March of the data center market.
The spending frenzy comes with a big default risk. According to Moody’s, structured finance has become a popular way to pay for new data center projects, with more than $9 billion of issuance in the commercial mortgage-backed security and asset-backed security markets during the first four months of 2025. Meta, for example, tapped the bond manager Pimco to issue $26 billion in bonds to finance its data center expansion plans.
But as more debt enters these transactions, analysts and lenders are putting more emphasis on lease terms for third-party developers.
“Does the debt get paid off in that lease term, or does the tenant’s lease need to be renewed?” Medina of Moody’s said. “What we’re seeing often is there is lease renewal risk, because who knows what the markets or what the world will even be like from a technology perspective at that time.”
Still, he added, well-financed megacap technology companies like Meta or Alphabet have enough padding in their cash flow to offset spending in their own data centers — as long as A.I. becomes profitable.
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Even if A.I. proliferates, demand for processing power may not. The Chinese technology company DeepSeek has demonstrated that A.I. models can produce reliable outputs with less computing power. As A.I. companies make their models more efficient, data center demand could drop, making it much harder to turn investments in A.I. infrastructure into profit.
After Microsoft backed out of a $1 billion data center investment in March, UBS wrote that the company, which has lease obligations of roughly $175 billion, most likely overcommitted.
Some worry costs will always be too high for profits. In a blog post on his company’s website, Harris Kupperman, a self-described boomer investor and the founder of the hedge fund Praetorian Capital, laid out his bearish case on A.I. infrastructure. Because the building needs upkeep and the chips and other technology will continually evolve, he argued that data centers will depreciate faster than they can generate revenue.
“Even worse, since losing the A.I. race is potentially existential, all future cash flow, for years into the future, may also have to be funneled into data centers with fabulously negative returns on capital,” he added. “However, lighting hundreds of billions on fire may seem preferable than losing out to a competitor, despite not even knowing what the prize ultimately is.”
It’s not just Silicon Valley with skin in the game. State budgets are being upended by tax incentives given to developers of A.I. data centers. According to Good Jobs First, a nonprofit that promotes corporate and government accountability in economic development, at least 10 states so far have lost more than $100 million per year in tax revenue to data centers. But the true monetary impact may never be truly known: Over one-third of states that offer tax incentives for data centers do not disclose aggregate revenue loss.
Local governments are also making huge investments in energy infrastructure to support the surge of data centers. Phoenix, for example, is expected to grow its data center power capacity by over 500 percent in the coming years — enough power to support over 4.3 million households. Virginia, which has more than 50 new data centers in the works, has contracted the state’s largest utility company, Dominion, to build 40 gigawatts of additional capacity to meet demand — triple the size of the current grid.
The stakes extend beyond finance. The big bump in data center activity has been linked to distorted residential power readings across the country. And according to the International Energy Agency, a 100-megawatt data center, which uses water to cool servers, consumes roughly two million liters of water per day, equivalent to 6,500 households. This puts strain on water supply for nearby residential communities, a majority of which, according to Bloomberg News, are already facing high levels of water stress.
“I think we’re in that era right now with A.I. models where it’s just who can make the bigger and better one,” said Vijay Gadepally, a senior scientist at the Lincoln Laboratory Supercomputing Center at the Massachusetts Institute of Technology. “But we haven’t actually stopped to think about, Well, OK, is this actually worth it?”
IN CASE YOU MISSED IT
The Fed voted to lower its benchmark lending rate. The S&P 500 rallied to a new high after the central bank made its first interest-rate cut this year, and signaled more were coming. Elsewhere, the Trump administration asked the Supreme Court for clearance to fire one of the central bank’s governors, Lisa Cook, whom the White House has accused of mortgage fraud. That decision is seen as a major test of presidential powers over the Fed’s independence.
Disney took Jimmy Kimmel off the air. The media giant suspended the late-night host’s show “indefinitely” after Brendan Carr, the chair of the F.C.C., threatened ABC and its affiliates over comments Kimmel had made about the suspect in the Charlie Kirk shooting and the right-wing reaction. Nexstar and Sinclair, which own dozens of ABC affiliates, quickly said they wouldn’t air Kimmel’s show. The administration’s threat drew criticism as an attack on free speech, and Trump and Carr suggested they may put pressure on other programs; Disney was condemned by Hollywood unions and prominent creatives.
Trump suggested the U.S. and China TikTok deal would move forward. After a call with China’s top leader, Xi Jinping, the U.S. president suggested on Truth Social that they’d reached an agreement to separate TikTok from its Chinese owner, ByteDance. He did not provide details on the agreement. TikTok faces a ban in America unless its business there is sold to a U.S. investor.
Other big deals: Microsoft, Nvidia and Google were among the companies that announced deals for tech projects in the U.K. ahead of Trump’s state visit there; The F.T.C. and several states sued Ticketmaster and its parent company over claims of illegal resale tactics; and Trump said companies should report results just twice a year.
How much can venture capital do?
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General Catalyst, one of the largest venture capital investors in the world, has lately been twisting the typical blueprint for venture capital firms. It has a wealth management business, built up stakes in ho-hum services businesses like accounting and property management, and perhaps most perplexing to industry traditionalists, acquired a hospital in Ohio.
Hemant Taneja, the firm’s chief, says it’s all part of his strategy for building long-term businesses, which he calls “inclusive capitalism” and outlines in his latest book, which will be released next week. DealBook talked with Taneja about the firm’s philosophy. The interview has been edited and condensed.
DealBook reported this week that Robinhood has plans for a new fund that sells access to privately held companies to retail investors. What do you think of the trend of expanding who can invest in private companies?
I really like it. We’re starting to create structures that allow for a lot more people to participate in the value creation of technology. I think we have to bring these opportunities in at the right part of the risk curve.
How?
Give retail investors access to companies that have already established themselves as category leaders and have a certain scale. As opposed to really, really high risk technologies or really, really high-risk stages of companies.
Some have seen steps like getting into wealth management and strategic advisory as a sign you’re preparing for an I.P.O. Are you considering taking the company public?
We are not. Every single thing we do is based on serving the founders that we back.
In your book, you lay out a case for what you call “inclusive capitalism.” How is that different from E.S.G. or impact investing?
This is very much the mind-set of inputs. How do you build with intentionality? How do you build with radical collaboration?
E.S.G. is output-oriented — a scorecard you can orient your business toward. Famously, at one point, Tesla was not considered an E.S.G. company. But it was responsible for moving an entire industry of automotive toward electrification.
When you focus on profitability, capitalism allows you to scale those businesses to be global. Impact investing is a euphemism for ideas that aren’t very profitable. It has nothing to do with ideas that are very impactful, in my opinion.
You write that capitalism is a privilege that society affords, and that if a business is working well for society, it has the biggest addressable market. But aren’t there obvious examples of businesses that are doing demonstrable harm but still very profitable?
Well I think the movie is not over yet.
If you think about a lot of the issues that emerged with social media, which led to polarization all over the world — look at the unrest. All the productivity we created with technology was captured by a handful of technology companies. It was not actually passed down to the world.
And so there is this underlying frustration with technology and globalization. At some point, that doesn’t, in my opinion, end well for businesses.
I covered a lot of those companies when they were start-ups, and they believed they were on track to make a positive societal impact. How do you even know?
Choices matter a lot. Advertising is a misaligned business model: It’s the advertisers who are paying, and consumers are getting the product. You’re trying to drive attention, because that’s how you get more advertisers, and that’s what led to a lot of the social media issues.
It’s about, are you really playing for the long term, and therefore, do you not over-optimize profit in the short term and make those long term choices?
So if it were your company, would you want to have less growth in favor of a longer-term horizon that accounts for societal impact?
I would think carefully about how to avoid that misalignment.
You know, if a clerk in a company was getting paid $80,000 a year, and you now have an A.I. clerk from some start-up that’s going to do the same job for $40,000 a year, it’s a very profitable service and it’s saving the business a lot of money. But that person is out of work.
And if you extrapolate that to all the white collar jobs, that’s the risk that’s in front of us. So are we going to build these companies that become entirely A.I. enabled and there are no more jobs?
I would guess a lot of people who focus on investments would say, yes, you should have as few people working for your company as possible. That’s great. And if it creates this societal problem, that is the tragedy of the commons and it’s not our job to address that.
I think tragedies of the commons lead to revolutions when it’s a big tragedy. And I think we’re talking about a pretty large impact A.I. is going to have. We have a choice of how we bring this technology to bear.
ONE LAST THING
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