AI Super-Bull Who Just Backed Nvidia-Groq Deal Warns of Data Center Collapse: ‘We Predict a Significant Financial Crisis’
One of the AI boom’s most aggressive proponents — whose company recently facilitated Nvidia’s biggest-ever deal — has issued a warning to the rest of the market that the “build it and they will come” approach to data centers is a dangerous gamble.
Alex Davis, managing director of Austin-based investment firm Disruptive, wrote in a letter to investors that he expects a “significant financial crisis” to hit the speculative data center market as soon as 2027 or 2028, driven by extreme capital spending and a growing disconnect between who builds AI infrastructure and who will ultimately use it.
“We see far too many business models (and valuation levels) without a realistic margin expansion scenario, with extreme capital spending, lack of traction from client companies, or over-reliance on ’round-trip’ investments – in some cases, all with the same company,” Davis wrote.
Davis’ warning was first reported by Axios.
The warning comes just days after Nvidia agreed to license the assets of Groq, a high-performance AI chip manufacturing startup that Disruptive has supported since its inception (not to be confused with Grok, Elon Musk’s AI chatbot). The transaction, which Davis said is valued at approximately $20 billion in cash, represents Nvidia’s largest deal ever and highlights how the company is working to lock down all verticals of AI talent and intellectual property.
Yet Davis says the same exuberance driving historic chip-level deals also fuels excesses elsewhere in the AI stack, particularly among third-party data center developers who are betting on what he calls the “build it and they will come” model.
“If you are a hyperscaler, you will own your own data centers,” Davis wrote in the letter. “We want to support owner-users, not speculative owners. »
The risk, from the perspective of venture capitalists, is not that demand for AI computing will disappear, but rather that the capital will fall into the wrong hands. While hyperscalers and well-capitalized technology companies can absorb massive upfront costs, speculative owners rely on short-term financing and customers that may never materialize at scale.
Davis didn’t name names in his letter, but if you follow his distinction between “speculative owners” and “owners/users” like Microsoft and Meta who will eventually build their own facilities, the most obvious targets might be wholesale giants like Digital Realty and Equinix.
Structured as what are called “real estate investment trusts,” these companies generate returns by developing and leasing capacity to the same tech giants that Davis says will soon be unable to capture margins themselves. If this shift accelerates, homeowners could face refinancing pressure just as a wave of debt comes due, even as overall demand for AI computing continues to rise. This imbalance, he warned, could put significant pressure on private credit markets and spill over if funding conditions tighten.
Digital Realty and Equinix did not immediately respond to Fortune request for comment.
Davis’ argument echoes warnings from across the aisle, including the thesis of notorious short seller Jim Chanos, who explicitly bets against “neoclouds” and converted crypto miners like Cipher Mining. Chanos argued that data center hosting is becoming a “commodity business,” warning customers that “the magic and the money will come from what the chips ultimately produce, not where they reside.” Both investors appear to agree that while the AI technology itself is valuable, third-party owners rushing to host it are falling into a trap.
Still, the caution is surprising from Davis, who said in the letter that he remains deeply optimistic about AI itself. Disruptive has deployed billions of dollars into private technology companies it considers critical to the AI economy, including Groq, open source model developers and defense-oriented software companies. Davis describes the current wave of AI innovation as a “unique” opportunity.
“While I continue to believe that continued advancements in AI technology present ‘once in a lifetime’ investment opportunities, I also continue to see risks and reasons for caution and investment discipline,” he wrote.
