Hidden within the financial warnings from Google and Klarna is a physical reality: energy. Sundar Pichai admitted that AI’s growth is colliding with energy constraints and climate goals. Sebastian Siemiatkowski questioned the massive infrastructure build-out. Together, they point to a physical limit on the AI boom.
Data centers are voracious consumers of electricity. If the grid cannot support the $1 trillion worth of new centers, or if governments regulate energy usage, the growth projections for AI companies are impossible to meet. This fundamental disconnect is part of the “irrationality” Pichai sees.
The market is beginning to price in these physical constraints. The sell-off in tech stocks reflects a realization that infinite digital growth requires finite physical resources.
Crypto mining, which also requires massive energy, faces the same headwinds. The $1 trillion loss in the sector is partly a repricing of the regulatory and energy risks associated with Proof of Work.
If the “AI Bubble” bursts, it might not be because the software failed, but because the power cord was pulled.