Dec 15 (Reuters) – The AI spending boom is entering a “dangerous” phase as big tech companies increasingly turn to outside investors to cover rising costs, a top executive at hedge fund giant Bridgewater Associates said on Monday.
The warning underscores the level of unease sweeping markets as several investors have begun to question the sustainability of massive capital spending on AI.
While technology has deeply permeated the economy, critics are beginning to wonder how serious the consequences could be if the boom does not translate into tangible gains.
“Looking ahead, there is a reasonable chance that we will soon find ourselves in a bubble,” Bridgewater co-chief investment officer Greg Jensen wrote in a note.
As costs rise beyond what internal cash flows can support, companies are turning to external sources of financing to pursue their ambitions.
A UBS report last month said AI data center and project financing deals rose to $125 billion through November this year, from $15 billion in the same period in 2024.
The latest bout of anxiety over AI trading was sparked by Oracle’s weak third-quarter sales and earnings forecasts, released last week.
Jensen said the increase in demand for “computing power” would require unprecedented physical construction of data centers, which face many limitations.
At the same time, valuations across the AI ecosystem have skyrocketed and the US economy is becoming increasingly concentrated around “the technology,” he added.
(Reporting by Niket Nishant in Bengaluru; Editing by Krishna Chandra Eluri)