Gartner is one of the technology industry’s best-known research firms. It’s also the company behind the Hype Cycle, a chart that tracks what happens when a new technology arrives. Excitement builds, expectations get carried away, and eventually reality catches up. The technology then enters what Gartner calls the “trough of disillusionment”, before the genuinely useful applications begin to emerge.
In January, Gartner said AI had entered that trough. This week, it put a rather extraordinary price on the industry’s enthusiasm. More than $3.5 trillion in AI infrastructure spending could have to be written down by 2030, meaning companies may discover that their expensive data centres and chips are worth considerably less than they expected.
The sum that doesn’t add up
The problem isn’t necessarily that AI won’t succeed. It’s that the companies building its infrastructure may struggle to earn back what they’re spending. Gartner expects nearly $1 trillion to be invested this year alone, followed by another $6 trillion between 2027 and 2030.
To cover those investments, pay interest and deliver a 12% return to investors, Gartner estimates that AI data centre owners would need to generate approximately $8.5 trillion in revenue by 2030. Its forecast? No more than $3.6 trillion.
And there’s another complication. AI chips become outdated quickly. Gartner’s Will Sommer warns that many companies may struggle to recover their investments before newer equipment makes their existing infrastructure less valuable.
Why the specialists are exposed
The biggest technology companies have other businesses generating income, giving them some breathing room if their AI investments take longer to pay off. But neoclouds, companies built specifically to rent out AI computing power, don’t have that same financial cushion. Gartner predicts that more than 80% of them won’t survive as independent businesses beyond 2030.
That doesn’t necessarily mean they’ll all collapse. Some may be acquired or merge with competitors. But the warning has already rattled investors, with neocloud shares falling on Wednesday following the report’s release.
Why All Weather is paying attention
Speaking at All Weather Capital’s weekly markets meeting on Thursday, Nick van Rensburg said the warning carries particular weight because of who wrote it. Gartner isn’t an investment firm betting against AI. It’s an established research company that has spent decades studying technology trends.
Van Rensburg also raised concerns about debt. Many of these companies have borrowed heavily and are financially connected, meaning trouble at one could quickly spread to others.
Gartner, meanwhile, doesn’t expect the industry’s infrastructure investments to achieve that 12% return until the end of 2032 at the earliest.