THE staggering investments in artificial intelligence (AI) keep coming: Earlier this month, AI chip giant Nvidia Corp announced it would invest US$100 billion (RM421.45 billion) to help OpenAI, the frontrunner in generative AI, build data centres.

How are these enormous sums possible when the returns on investments, at least for now, pale in comparison?

Huge Investments

AI-related spending is soaring worldwide, expected to reach approximately US$1.5 trillion by 2025, according to US research firm Gartner, and over US$2 trillion in 2026 — nearly 2% of global GDP.

Even though tangible returns fall short of the investments going in, the AI revolution appears unstoppable.

“There’s no doubt among investors that AI is the major breakthrough technology” — on par with harnessing electricity, said Denis Barrier, head of investment fund Cathay Innovation.

Silicon Valley’s mindset “is more about seizing the opportunity” than worrying about any risks, he said.

Geopolitical tensions are helping drive the frenzy, primarily to build massive data centres housing tens of thousands of expensive chips that require phenomenal electrical power and large-scale, energy-hungry cooling.

From 2013 to 2024, private AI investment reached US$470 billion in the US — nearly a quarter in the last year alone — followed by superpower rival China’s US$119 billion, according to a Stanford University report.

Just a handful of giants are on the receiving end, with OpenAI Inc first in line.

In March 2025, ChatGPT’s parent company raised approximately US$40 billion, bringing its estimated valuation to around US$300 billion, according to analysts.

‘Circular Funding’

OpenAI is now the world’s most valuable company, surpassing SpaceX, worth US$500 billion in a deal for employees to sell a limited number of shares.

The company led by CEO Sam Altman sits at the centre of an AI investment bonanza: It oversees the Stargate project, which has secured US$400 billion of the US$500 billion planned by 2029 for Texas data centres spanning an area the size of Manhattan.

The White House-backed consortium includes SoftBank Group Corp, Oracle Corp, Microsoft Corp and Nvidia.

Nvidia, which completed over 50 venture capital deals in 2024 according to PitchBook data, is often chided for practicing “circular funding” — investing in start-ups that use the funds to buy its chips.

Some analysts criticise this as bubble-fuelling behaviour.

The OpenAI deal “will likely fuel those concerns,” said Stacy Rasgon, a Bernstein Research analyst.

In the first six months of 2025, OpenAI pulled in around US$4.3 billion in revenue, specialist outlet The Information reported earlier

this month.

Therefore, unlike Meta Platforms Inc or Google llc with substantial cash reserves, OpenAI and competitors like Anthropic PBC or Mistral AI must be creative in their search for funds to bridge the gap.

For AI believers, an explosion in revenue is only a matter of time for a company whose ChatGPT assistant serves 700 million people — reaching nearly 9% of humanity less than three years after launch.

‘Up in Smoke’

Nothing is certain, however.

Feeding AI’s computing appetite will cost up to US$500 billion annually in global data centre investments through 2030, requiring US$2 trillion in annual revenues to make the expenses viable, according to consulting firm Bain & Co.

Even under optimistic assumptions, Bain estimates the AI industry faces an US$800 billion deficit.

OpenAI itself plans to spend over US$100 billion by 2029 — meaning turning a profit is still a ways off.

On the energy front, AI’s global computing footprint could reach 200 gigawatts (GW) by 2030 — the annual equivalent of Brazil’s electric consumption — half of that in the US.

Despite the daunting figures, many analysts remain optimistic.

“Even with concerns about a possible ‘AI bubble’…we estimate the sector is in its 1996” moment during the Internet boom, “absolutely not its 1999” before that bubble burst, said Dan Ives, a Wedbush Securities analyst.

Long-term, “many dollars will go up in smoke, and there will be many losers, like during the Internet bubble, but the Internet remained,” said the Silicon Valley investor. — AFP