BILLIONS BUST BILLIONS : A.I. STUDENTS ESSAY

BORROWED billions - ratchet up the risks of the A.I. boom. Building vast data centers puts smaller outfits in debt, echoing the dot-com bubble.

For years, the tech industry's giants, which makes tens of billions of dollars in annual profits, usually built new data centers with their own money.

Just last year, Google expanded an already massive computing facility in Oklahoma, while Amazon went to work on a new data center in Indiana that will eventually use enough electricity to power over a million homes.

But a new set of free spenders is emerging in the gallop toward bigger and bigger artificial intelligence projects.

Smaller outfits - are from household names, not nearly as wealthy but eager to get in on the A.I. boom  have started to build their own giant data centers. And they are borrowing tens of billions of dollars to do it.

In September, Meta agreed to buy $14.3 billion in computing power from CoreWeave, a New Jersey company that went public this year.

CoreWeave has told financial analysts that for every $5 billion in computing power it plans to sell to customers over the next four years through new data centers, it must borrow $2.85 billion.

The same month, Microsoft made a similar deal with Nebius, a start-up based in Amsterdam, for $19.4 billion.

To help build its data centers, Nebius recently sold $3.16 billion in what are called convertible notes, which can be converted into company shares down the road but begin as debt.

NOW, THERE ARE GROWING CONCERNS that these smaller companies are shouldering risks they may not be able to handle, entwining themselves in relationships that financial analysts say are worryingly opaque.

So are a handful of much larger companies that are working with OpenAI, the San Francisco company that launched the A.I. boom with its ChatGPT three years ago.

The debt that is used to fund data centers could exceed $1 trillion by 2028, or more than a third of all dollars spent on these facilities, according to analysts at Morgan Stanley.

If A.I.technologies do not pull in as much revenue as expected over the next several years, the debt laden companies could be left holding the bag for the rest of the industry.

The Essay Publishing continues. The World Students Society thanks Cade Metz.