Alibaba Group Holding Ltd. Chairman Joe Tsai warned of a potential bubble forming in datacenter construction, arguing that the pace of that buildout may outstrip initial demand for AI services.

A rush by big tech firms, investment funds and other entities to erect server bases from the US to Asia is starting to look indiscriminate, the billionaire executive and financier said. Many of those projects are built without clear customers in mind, Tsai told the HSBC Global Investment Summit in Hong Kong Tuesday.

From Microsoft Corp. to SoftBank Group Corp., tech firms on both sides of the Pacific are spending billions of dollars buying the Nvidia Corp. and SK Hynix Inc. chips crucial to AI development. Alibaba itself — which in February declared it was going all-in on AI — plans to invest more than 380 billion yuan ($52 billion) over the next three years. Server farms are springing up from India to Malaysia, while in the US, Trump is touting a Stargate project that envisions an outlay of half-a-trillion dollars.

Many on Wall Street have begun to question that spending, especially after Chinese upstart DeepSeek released an open-source AI model that it claims rivals US technology but was built at a fraction of the cost. Critics have also pointed out the persistent dearth of practical, real-world applications for AI. The Chinese startup released an update to its V3 model Tuesday that claims to enhance programming capabilities.

“I start to see the beginning of some kind of bubble,” he told delegates to the summit. Some of the envisioned projects commenced raising funds without having secured “uptake” agreements, he added. “I start to get worried when people are building data centers on spec. There are a number of people coming up, funds coming out, to raise billions or millions of capital.”

Tsai singled out US spending in particular. Just this year, Amazon.com Inc., Alphabet Inc. and Meta Platforms Inc. pledged to spend $100 billion, $75 billion and up to $65 billion, respectively, on AI infrastructure.

But in February, TD Cowen analysts cited signs that Microsoft has canceled some leases for US data center capacity, raising concerns over whether it’s securing more AI computing capacity than it needs in the long term.

Its executives have played down those concerns, saying Microsoft is spending more than it ever has in its history, outlays that mostly go toward chips and data centers.

“I’m still astounded by the type of numbers that’s being thrown around in the United States about investing into AI,” Tsai told the audience.

“People are talking, literally talking about $500 billion, several 100 billion dollars. I don’t think that’s entirely necessary. I think in a way, people are investing ahead of the demand that they’re seeing today, but they are projecting much bigger demand.”