Alibaba Group Holding Ltd. Chairman, Joe Tsai, has expressed concerns about a potential bubble in the construction of datacenters, warning that the rapid expansion of infrastructure may surpass the current demand for AI services.

Tsai highlighted how various big tech companies and investment firms are building data centers across different regions without clear plans or customers in place. Tech giants like Microsoft Corp. and SoftBank Group Corp. are investing heavily in chips necessary for AI development, with Alibaba committing to a significant investment in AI over the next three years.

Despite these investments, some experts question the sustainability of the spending, especially after Chinese company DeepSeek introduced a cost-effective AI model that competes with US technology. Tsai noted the emergence of projects seeking funding without confirmed uptake agreements, raising concerns about speculative data center construction.

He particularly highlighted the considerable AI infrastructure spending by US companies such as Amazon.com Inc., Alphabet Inc., and Meta Platforms Inc. However, reports of Microsoft canceling some data center leases in the US have raised doubts about overcapacity in AI computing infrastructure.

Tsai’s cautionary remarks at the HSBC Global Investment Summit in Hong Kong emphasized the need for prudent planning and real demand assessments in data center development to avoid the risks of a potential bubble in the sector.