Data center boom may end up being "irrational," investor warns

• Just this week, Meta announced a deal to buy the power from an operating traditional nuclear station in Illinois that was set to retire in 2027.

Zoom in: Speaking at Axios' AI Summit in New York, Lux Capital co-founder and partner Josh Wolfe compared the build-out of data center infrastructure to previous bubbles in fiber-optic networking and cloud computing.

• "I think that you're going to have the same phenomenon now," said Wolfe, whose firm Lux backs deeptech and science startups across sectors like AI, defense, and biotech.
• What any one individual hyperscaler is doing to build out infrastructure is rational, but "collectively becomes irrational," said Wolfe. "It will not necessarily persist."

The intrigue: Wolfe raised a flag specifically on the build-out of the power infrastructure for these data centers.

• "One take that is related to that is the demands for energy, which is presumed that, because you need all these data centers, then you need small modular reactors, and so you're getting speculative capital that's going into the energy provision therein," Wolfe said.
• "So I think that that whole thing is going to end in disaster, mostly because as cliched as it is, history doesn't repeat. It rhymes."

The bottom line: Money continues to flow into data center infrastructure, but the bubble could eventually pop.