Surviving The AI Bubble: Three Factors That Separate Future Winners - Alphabet (NASDAQ:GOOG), Amazon.com (NASDAQ:AMZN)

Core Insights - The AI boom in 2025 resembles past infrastructure manias, characterized by enthusiasm, overbuilding, and a foundation for future growth [1] - KKR's research emphasizes that while capital cycles fluctuate, physical assets endure and appreciate over time [2] Industry Overview - AI data centers are currently experiencing rapid construction, with McKinsey estimating nearly $7 trillion in global data-center infrastructure investment by 2030, over 40% of which will occur in the U.S. [3] - The current data center vacancy rates in the U.S. are near record lows, indicating strong demand despite the chaotic investment environment [4] Investment Landscape - Major hyperscalers like Amazon, Google, Microsoft, and Meta are projected to spend over $300 billion in capital expenditures this year, excluding other companies involved in AI model training and GPU farm development [5] - Power availability has become a critical factor in data center development, with competition for land, permits, and grid access intensifying in regions like Northern Virginia [6] Success Factors - Successful companies will focus on hard-nosed underwriting, emphasizing real project economics rather than speculative models [8] - Establishing genuine competitive advantages, such as power rights and operational capabilities, is essential for survival in the industry [9] - Discipline in planning, including long-term agreements and adaptable designs, is crucial for navigating the fast-evolving hardware landscape [11] Infrastructure Challenges - The current expansion of data centers is straining state-level infrastructure, with projected power demand potentially tripling by 2030 and water use becoming a contentious issue [12] - Local communities are increasingly pushing back against data center developments due to the resource trade-offs involved [12] Historical Context - Historical technology waves have eventually found equilibrium, with past infrastructure consolidating and creating more economic value than initially perceived [13]