An AI super-bull who just backed the Nvidia-Groq deal warns of a data center bust: ‘We foresee a significant financial crisis’
Alex Davis says third-party data-center developers will eventually be jilted by the hyperscalers they serve, and face a subsequent debt crisis.
One of the most aggressive backers of the AI boom—whose firm most recently facilitated Nvidia’s largest deal ever—has issued a warning to the rest of the market: The “build it and they will come” approach to data centers is a dangerous gamble.
Alex Davis, chief executive of Austin-based investment firm Disruptive, wrote in a letter to investors he expects a “significant financing crisis” to hit the speculative data-center market as soon as 2027 or 2028, driven by extreme capital expenditure and a growing mismatch between who is constructing AI infrastructure and who will ultimately use it.
“We are seeing way too many business models (and valuation levels) with no realistic margin expansion story, extreme capex spend, lack of enterprise customer traction, or overdependence on “roundtrip” 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 assets from Groq, a high-performance AI chipmaking startup Disruptive has backed since its founding (not to be confused with Grok, Elon Musk’s AI chatbot). The transaction, which Davis has said is valued at roughly $20 billion in cash, represents the largest deal Nvidia has ever completed and underscores how aggressively the company is moving to lock up all the verticals in AI talent and intellectual property.
Yet, Davis argues the same exuberance driving landmark transactions at the chip level is also fueling excess elsewhere in the AI stack, particularly among third-party data-center developers betting on what he called the “build it and they will come” model.
“If you’re a hyperscaler, you will own your own data centers,” Davis wrote in the letter. “We want to back the owner-users, not the speculative landlords.”
The risk, as the venture capitalist sees it, is not that demand for AI compute disappears, but rather that capital has rushed into the wrong hands. While hyperscalers and well-capitalized tech companies can absorb massive upfront costs, speculative landlords 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 about “speculative landlords” versus “owner/users” like Microsoft and Meta that will eventually build their own facilities, the most obvious targets could be the legacy wholesale giants like Digital Realty and .