(Bloomberg) — Alibaba Group Holding Ltd. Chairman Joe Tsai warned of a potential bubble forming in data center construction, arguing that the pace of that buildout may outstrip initial demand for AI services.
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A rush by big tech firms, investment funds and other entities to erect server bases from the US to Asia is starting to look indiscriminate, the billionaire executive and financier said. Many of those projects are built without clear customers in mind, Tsai told the HSBC Global Investment Summit in Hong Kong Tuesday.
From Microsoft Corp. to SoftBank Group Corp., tech firms on both sides of the Pacific are spending billions of dollars buying the Nvidia Corp. and SK Hynix Inc. chips crucial to AI development. Alibaba itself — which in February declared it was going all-in on AI — plans to invest more than 380 billion yuan ($52 billion) over the next three years. Server farms are springing up from India to Malaysia, while in the US, President Donald Trump is touting a Stargate project that envisions an outlay of half-a-trillion dollars.
Alibaba’s shares slid more than 3% in Hong Kong. Many on Wall Street have begun to question that spending, especially after Chinese upstart DeepSeek released an open-source AI model that it claims rivals US technology but was built at a fraction of the cost. Critics have also pointed out the persistent dearth of practical, real-world applications for AI.
“I start to see the beginning of some kind of bubble,” Tsai told delegates. Some of the envisioned projects commenced raising funds without having secured “uptake” agreements, he added. “I start to get worried when people are building data centers on spec. There are a number of people coming up, funds coming out, to raise billions or millions of capital.”
Alibaba is mounting a comeback in 2025 thanks in part to the recent popularity of its Qwen-based AI platform, which it envisions boosting Alibaba’s core commerce business as well as cloud services. At the summit, Tsai talked about how Alibaba was undergoing a “reboot” and rehiring after years of regulatory scrutiny that crimped growth. It’s initiated programs to acquire the AI talent it needs to further its stated ambition of exploring artificial general intelligence.
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