Moneywise and Yahoo Finance LLC may earn commission or revenue through links in the content below. The AI industry just got even more expensive. On Aug. 10, NVIDIA announced a new partnership with six financial institutions that would provide the chip company with $500 billion in third-party capital to put toward AI infrastructure (1).
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Today, we are helping create a new class of productive, investable infrastructure: AI factories," said Jensen Huang, CEO and founder of NVIDIA, in the company's press release. "We are bringing the world's leading long-term capital providers together to independently underwrite AI infrastructure." AI companies have been pursuing aggressive growth recently, and it's showing in their capital expenditures. Alphabet and Amazon are both forecasting capital expenditures in the hundreds of billions of dollars, while Tesla is expecting to more than double its expenditures this year, according to CNBC (2).
"We should be spending on capex as fast as we can spend, as fast as we can without it being too wasteful," Tesla CEO Elon Musk said during a recent earnings call, as reported by CNBC. "It's OK to be a little less capital efficient if we get things done sooner." But will all this spending pay off for AI companies? And how does this spending impact your portfolio's bottom line?
Much of this massive spending — including NVIDIA's $500 billion deal — is going toward building data centers that AI companies need to expand their operations. Proponents say these data centers will bring more jobs for Americans, especially in the skilled trades. "Together, we can help deliver the compute capacity that companies need to grow and create more jobs, supporting the continued growth of the US and global economies," BlackRock CEO Larry Fink said about his company's part in the NVIDIA deal (1).
However, while building data centers can employ plenty of construction workers, those jobs are temporary. And data centers generally don't create many long-term positions once they're built. "Most data centers, you know, they employ about 100 to 200 people," Kartik Hosanagar, codirector of the Wharton Business School's AI research center, told NPR (3).
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