IBM CEO: IS ARTIFICIAL INTELLIGENCE PROFITABLE?
We begin this last week of blogs before the Christmas break with our usual Christmas greetings, well wishes, and caveats. Both Daniel and I want to wish everyone a good Adventide and a Merry Christmastide and every blessing of the season. After this week, I will be taking about a month off until Jan 12th, and as always Daniel will also be breaking over the Christmas holidays and technical support will be on reduced status (meaning it may take some time to address issues). As always, if particularly important stories arise that need blogging or a News and Views, I will do so.
So, once again, Merry Christmas to all of you Gizars, and all best wishes for a the happiest of New Years. Our thanks, again, to all of you who take the time throughout the year to send us so many excellent and bloggable articles and stories. We truly do appreciate it.
With that in mind, the following story was spotted and shared by P.T., and it's definitely worth passing along, because if you've been following the gradual trickle of stories coming out about the problems occurring with those artificial intelligence "data centers", it is beginning to look a lot like a scam and a bubble. For one thing, as I and many others have pointed out, massive investments are being made before the discussion is even settled on what artificial intelligence really is, if it can work, or if it can, if it will work as billed. In other words, massive investments are being touted before the project is even completed or even if it is certain it will work. Rather, we're being asked to invest trillions in something that may not work, and to trust the same people that gave us the covid planscamdemic with King Midas amounts of treasure. It's like introducing Bernie Madoff (or for those of you who remember, Bernie Cornfeld and Robert Vesco) with the words "and now, here to show you the investment opportunity of a lifetime, are our friends, Bernie Madoff, Bernie Cornfeld, and Robert Vesco! Let's give them a warm round of applause!"
But back to artificial intelligence and those money pits data centers.
Most of the anecdotal stories out there seem to indicate massive problems (remember the one where an artificial intelligence decided to erase a corporation's entire database even after have been "commanded" not to do so?). Then there's the matter of the power usage, and, as I blogged just last week, many insurance companies are walking away from insuring anything to do with it . The reason? Too risky. (q.v. my blog https://gizadeathstar.com/2025/12/insurance-no-way-artificial-intelligence-is-too-risky/).
Now you can add IBM CEO Arvind Krishna to those suggesting that something is "way off" with the artificial intelligence narrative being promoted by Mr. Globaloney:
IBM CEO Questions ROI on Massive AI Data Centre Spending
Now here's the bad news: Mr. Krishna did a small "back of the envelope" calculation, and came to the conclusion that all the financial hype surrounding the data-center boom is just that: hype, because it has a built in problem:
IBM CEO Arvind Krishna has raised concerns over the financial viability of the global AI buildout, arguing that the scale of investment required for next generation data centres far exceeds any realistic return.
Speaking on the “Decoder” podcast with host Nilay Patel, he outlined calculations that place worldwide AI computing commitments at around 100GW of capacity and a cost of roughly US$8tn.
“There’s no way you’re going to get a return on that in my view because eight trillion of capex means you need roughly 800 billion of profit just to pay for the interest,” said Arvind Krishna.
And then there's another problem, and that's the whirlwind pace of technology and just good-old-fashioned "wear and tear", or "overhead" as we used to call it (and those with some business sense still do):
A large portion of that cost comes from the rapid depreciation cycle of AI chips. “You’ve got to use it all in five years because at that point, you’ve got to throw it away and refill it,” he said.
Yet again, there's the matter of a monopolistic-cartel-like tendency in the development of artificial intelligence, which Mr. Krishna also disputes is not an inevitability:
Nilay Patel asked whether he had shared these concerns with Sam Altman, CEO of OpenAI. Arvind replied: “It’s a belief that one company is going to be the only company that gets the entire market. That’s a belief. That’s what some people like to chase. And I understand it from their perspective. That’s different than I agree with.”
This statement becomes the opportunity for our run to the end of the high octane speculation twig and our nosedive into the canyon of speculation below. Mr. Krishna does not really suggest why this statement may contribute to the costs of artificial intelligence. In fact, he makes no suggestion that it will at all. He merely makes the statement apparently in a context of other cost concerns and risks associated with its development, leaving the door wide open for speculation. So what happens if a monopolistic artificial intelligence economy - for those of you who can remember Ma Bell - does not happen, and when the wonderfully fractious world of artificial intelligences start fighting each other, with data center A ganging up with data center B to complicate the life (and calculations) of data center C? It's easy to imagine: the power usage of all will go up - probably dramatically - and thus the overhead and associated costs will go up, while actual productive output, as a percentage of output, will go down. And voila, in the topsy turvy world of artificial intelligence, normal economic models of "economies of scale" and cost benefits of cartel-like arrangements and monopolies and the "benefits of competition" are turned on their heads. As I've warned many times, when market behaviors are turned over to computers and "algorithmic trading" do not expect them to act and behave according to economic models formulated when humans were in control of trading. In fact, let's go a step further and really make that nosedive into the speculation canyon a gymnastic feat by adding a somersault and twist or two: I am suggesting that artificial intelligence is such a radical departure in the economic scheme of things that we simply have no models at all on what sort of financial and economic performance to expect. We're all guessing.
Which raises another disturbing possibility and obvious and self-evident scenario and question, one that to my knowledge no one has yet mentioned. Being something of an enfant terrible and unable to resist obvious questions and scenarios, I do so here. What if all of this obsession with artificial intelligence and datacenters and so on is just another deliberately-created bubble? What if we're watching, in full view of everyone, the latest banksters' scam to steal and plunder hard assets, while perhaps (depending on how long they can get away with it) accomplishing yet another goal some of them have had all along: the ruin - the final ruin - of the western economic and financial systems?
Just a thought.
Have a nice day, and I'll see you on the flip side...
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