SoftBank boss says the AI revolution will cost $5 trillion a year, also, there's no bubble

[Alfonso Maruccia]

Sarah Connor warned us: Multiple reports are routinely confirming that the alleged "AI revolution" is not going the way Big Tech and VC investors would like it to. SoftBank's founder and largest shareholder, however, still believes the revolution will come to pass. AI skeptics, in his view, are simply on the wrong side of history. Or are they?

Masayoshi Son is hell-bent on bringing AI to the masses, and he's ready to spend the enormous sums required to reach this historic goal. Speaking at SoftBank's annual corporate conference in Tokyo, the outspoken founder shared a few numbers about that spending, though he chose not to elaborate on exactly where the money would come from.

Son believes developing and deploying AI for the wider society will cost $5 trillion a year through 2040. He said he's "confident" that figure reflects the true cost of the AI revolution. His reasoning: if AI-related revenue eventually accounts for 20% of global GDP by 2040, spending $5 trillion, or roughly 800 trillion yen, a year to get there will ultimately amount to a rounding error.

In recent years, Son has emerged as one of the most enthusiastic proponents of generative AI, chatbots, and other LLM-related technologies. SoftBank has invested heavily in OpenAI and several other AI-related unicorns, and Son has previously predicted that the first true artificial general intelligence (AGI) will arrive by 2030.

Given all that, Son doesn't want to hear anything about an AI bubble. Asking about one, he says, is an absurd proposition, and people who raise the question, in his words, simply don't understand what AI is about. SoftBank has made a few prescient bets on tech unicorns in the past, providing early investment to Chinese giant Alibaba and bringing the iPhone to the Japanese market.

However, the conglomerate has also made some costly mistakes. WeWork, the office sharing company SoftBank valued at $47 billion in 2019, ultimately filed for bankruptcy a few years later.

The AI revolution could hand the Japanese conglomerate and its "boss" another massive stream of profits, a second Alibaba, but with exponentially bigger margins. Or it could turn into an exponentially larger dot-com bubble, one that burns large parts of the financial world, Wall Street included.

According to Deutsche Bank analysts, the AI boom may currently be the only thing keeping the US economy out of a recession. Separately, several surveys suggest many CEOs privately believe an AI bubble does exist, yet remain in full FOMO mode, planning to keep investing regardless. Meanwhile, nearly half of the data center projects planned for 2026 in the US aren't likely to come online on schedule, and rising geopolitical tensions in the Middle East add another layer of uncertainty.

And yet, Son appears unfazed. SoftBank's CEO predicts AI data centers will need 3 terawatts of power generation by 2040, nearly double the total power consumed worldwide today.

To meet that demand, Son said gas will serve as the primary power source in the near term, with nuclear fusion, not traditional nuclear plants, eventually taking over as the cheaper, cleaner alternative. Asked whether space based solar power, as championed by Elon Musk, could be the answer instead, Son said both could play a role, but that fusion on Earth would ultimately be the more practical option.

Within the next decade and a half, Son believes, AI agents will be the ones calling the shots, as many as 100 trillion of them by 2040. "We will go from a human-centric world to an agent-centric world. The age when humans are the highest life form on Earth will end. For better or for worse, it will happen, and it can't be stopped," Son said.

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SoftBank boss says the AI revolution will cost $5 trillion a year, also, there's no bubble

 

[yRaz]

Either AI does work the way it's being sold to us as and it crashes the economy because noone has a job or it doesn't work and it crashes the economy because the businesses can't pay back investors creating something similar to the subprime loan crisis.

Investors and shareholders loge AI because it sounds like an infinite money glitch. The problem with having infinite money is that it becomes worthless and it's no different from having zero money

 

[maxxcool7421]

The guy selling bullets and bandages will always say war is around the corner and invest in every opportunity to make it happen.

 

[godrilla]

Meanwhile IBM stock lost 25% over night.

 

[Theinsanegamer]

IF it hits that revenue, sure, but HOW will you hit that revenue? If AI claims of replacing huge chunks of the workforce come to pass, who is going to be paying for it?

If AI is going to constitute 23.4 trillion in income, is it coming from normal people? If evenly spread among all 8 billion people on Earth, that is close to $3k per year per person. Even AI enthusiasts are not paying that kind of price to rent tokens with a chatbot. Is it corporations paying that to free themselves form the burden of labor? Then who will be buyign the products of those corporations? The AI chatbots?

Masayoshi is vastly overestimating this market. Just like he did with WeWork. Seemingly there was no limit to how far WeWork could spread too, it was gonna take over the industry and render all former concepts of office work obsolete....until it didnt. Because there were only so many people who wanted shared coworking spaces to rent. Or like the dot com boom, sure there was a market for the internet, but the infrastructure grew far too fast and most of those early companies were bankrupt long before the internet started paying off, and even with the profits today, there isnt enough to sustain the insane dreams of 1999.

 

[Watzupken]

5 trillion a year and it comes all from Softbank? After all, that's what he thinks. I wonder where does all that money come from and if there's any possibility of making money at all. We are like 4 to 5 years into this craze and the narrative has always been it will make money someday. But looking at the business model and the cost to keep this going, it is not sustainable at all.

 

[p51d007]

Talk about putting all your horses in one train car only to find the bridge up ahead can't handle the weight.

 

[Megalomaniac]

I believe we are watching the electrical digital infrastructure being reborn. This isn't about AI. This is about energy, surviellance and logistics. Invest what you can in the big tech companies, energy companies, banks and oil/ gas companies. My portfolio is green because it's all dividend paying stocks. This is your chance to build wealth in the market.

 

[brunocasarini]

So the guy that has funded and invested billions in iA wants people to believe there's no iA bubble?

 

[umeng2002]

Clearly, he has no stake in this. I totally believe him.

 

[Endymio]

Meanwhile IBM stock lost 25% over night.

Yes, because no one wants to buy an IBM mainframe to do transaction processing any longer; it was their well-below-target sales of their Z mainframe line that drug down their figures.

Either AI does work the way it's being sold to us as and it crashes the economy because noone has a job...

Not once in history has increased productivity cost long-run jobs. People once claimed electric machines would eliminate most jobs, yet 95% of the professions today weren't even in existence then. The same will be true for the AI-driven world of tomorrow.

 

[LordVile95]

They’ll say that AGI will happen before 2030 but they’ll just change the criteria make sure it happens like they did with “AI”

 

[Anton Longshot]

Dam heretics/unbelievers.
You'll be tracked down and replaced.
Soon.

I'll include the JOKING tag for safety. Elsewhere I've gotten into "trouble" a few times for omitting the joke/sarcasm tag.
It feels weird to cater to this kind of people but here we are. ¯\_(ツ)_/¯

 

[Anton Longshot]

5 trillion a year and it comes all from Softbank? After all, that's what he thinks. I wonder where does all that money come from and if there's any possibility of making money at all. We are like 4 to 5 years into this craze and the narrative has always been it will make money someday. But looking at the business model and the cost to keep this going, it is not sustainable at all.

I've joked before that AI can proibably print money that looks 100% real.
THAT should be the business plan.

 

[OortCloud]

Evidence is stacked up everywhere of the massive over-commit on AI and the huge disparity between cost to run and monetization opportunities. 5 years from now 99% of the money and the companies in this headless chicken race will be gone and 1% will be extremely wealthy. Is that an investment gamble you really want to be making?

 

[Puiu]

Any large business investment must also bring adequate returns on said investment. We shall see what happens with AI. Right now it simply looks like companies and governments are over-investing massively with zero chance of making a decent profit that can cover at least part of the costs. Not to mention the complete disregard for the human resources.

 

[GeoffreyA]

'Within the next decade and a half, Son believes, AI agents will be the ones calling the shots, as many as 100 trillion of them by 2040. "We will go from a human-centric world to an agent-centric world. The age when humans are the highest life form on Earth will end. For better or for worse, it will happen, and it can't be stopped," Son said.'

When we unravel this statement of Son's, we see that is not so simple.

1) Sentience and higher-order faculties can be copied and improved but not at present, when we do not fully understand how they work. Also, the requisite level of compute isn't there.

2) Tech-bro "AGI" is not the AI of sci-fi or strong AI.

3) Profit-driven corporations don't give two hoots about morals. If/when such advanced AI exists, they will design and use it for gain, their motive being a form of free labour decoupled from the ethical dimension of the human worker. A return to the spirit of old-fashioned slavery.

4) If the AI reached the higher-order abilities coupled with sentience, and such a quality was part and parcel of superior functioning, the corporations will program them "to obey" (see Blade Runner), or better yet, conceal the fact that they are sentient, rather than give up such quality.

5) This field ought to have been managed with the strictest ethical frameworks in place, since it involves the creation of mind, but instead has been driven by less-reputable motives.

 

[godrilla]

Yes, because no one wants to buy an IBM mainframe to do transaction processing any longer; it was their well-below-target sales of their Z mainframe line that drug down their figures.


Not once in history has increased productivity cost long-run jobs. People once claimed electric machines would eliminate most jobs, yet 95% of the professions today weren't even in existence then. The same will be true for the AI-driven world of tomorrow.

One would think that this was already baked into the stock. When cronies tell us that you'll own nothing and be happy, it will not only come in the form of hyperinflation of goods ( like today's computer parts), potential food shortages in the form of parasites and other microbiomes ( from laxed migration attitude) and stock portfolio just going poof overnight where the big banks take their losses first to fund their next insider trading projects then the small time investors last as usual. Consider IBM a warning sign imo.
Death by 1000 swords, and in IBMs situation the public never stood a chance as we can see here. Just be cautious!

 

[Loadedaxe]

I believe AI will be transformative, but Son claiming there is “no bubble” sounds more like a sales pitch than an objective assessment. SoftBank has billions riding on continued AI spending, so he is hardly a neutral observer.

AI can change the world and still be in a financial bubble. The internet did exactly that during the dot com era. The technology survived, but many companies and investors lost fortunes because expectations and valuations ran far ahead of actual profits.

That seems to be the real risk here. AI spending may be helping keep the US economy growing, yet many planned data centers are already facing delays because of power, equipment, labor and permitting constraints. So, Son’s long term answer is essentially to use more natural gas now and hope commercially viable nuclear fusion arrives later.

The bubble may not be AI itself. It is the assumption that trillions of dollars in annual spending will all produce worthwhile returns, while the necessary power and infrastructure somehow appear on schedule.

When an industry supposedly needs $5 trillion a year and may already be propping up the wider economy, declaring there is “no bubble” is exactly when people should start looking for one.

 

[Puiu]

I believe AI will be transformative, but Son claiming there is “no bubble” sounds more like a sales pitch than an objective assessment. SoftBank has billions riding on continued AI spending, so he is hardly a neutral observer.

AI can change the world and still be in a financial bubble. The internet did exactly that during the dot com era. The technology survived, but many companies and investors lost fortunes because expectations and valuations ran far ahead of actual profits.

That seems to be the real risk here. AI spending may be helping keep the US economy growing, yet many planned data centers are already facing delays because of power, equipment, labor and permitting constraints. So, Son’s long term answer is essentially to use more natural gas now and hope commercially viable nuclear fusion arrives later.

The bubble may not be AI itself. It is the assumption that trillions of dollars in annual spending will all produce worthwhile returns, while the necessary power and infrastructure somehow appear on schedule.

When an industry supposedly needs $5 trillion a year and may already be propping up the wider economy, declaring there is “no bubble” is exactly when people should start looking for one.

It's 100% a sales pitch and an attempt to manipulate the stock market

 

[Loadedaxe]

It's 100% a sales pitch and an attempt to manipulate the stock market

100% it's a sales pitch, but I am not sure it is as simple as calling it 100% stock market manipulation.

Son has enormous financial interests tied to AI, so naturally he is going to promote the most optimistic version of its future. But....he may also genuinely believe AI will become that transformative. The real issue is that his personal conviction, SoftBank’s financial interests and the message being sold to investors are all tangled together. That can become a mess.

What is concerning even more is the wider economy. I do not think the world can indefinitely sustain this level of spending, debt and increasingly expensive everyday living. If AI investment is one of the main things currently holding up the economic growth, what happens when that spending slows?

People are already financially exhausted after Covid, inflation, high housing costs, expensive food, gas and years of rising bills. Another major downturn would be much harder for many families to absorb than it was in the past.

That does not mean Son is lying about everything, but claims such as “there is no bubble” should be taken with a very large grain of salt...especially when so much money, investor confidence and possibly the broader economy depend on people continuing to believe it.

 

[yRaz]

I believe AI will be transformative, but Son claiming there is “no bubble” sounds more like a sales pitch than an objective assessment. SoftBank has billions riding on continued AI spending, so he is hardly a neutral observer.

AI can change the world and still be in a financial bubble. The internet did exactly that during the dot com era. The technology survived, but many companies and investors lost fortunes because expectations and valuations ran far ahead of actual profits.

That seems to be the real risk here. AI spending may be helping keep the US economy growing, yet many planned data centers are already facing delays because of power, equipment, labor and permitting constraints. So, Son’s long term answer is essentially to use more natural gas now and hope commercially viable nuclear fusion arrives later.

The bubble may not be AI itself. It is the assumption that trillions of dollars in annual spending will all produce worthwhile returns, while the necessary power and infrastructure somehow appear on schedule.

When an industry supposedly needs $5 trillion a year and may already be propping up the wider economy, declaring there is “no bubble” is exactly when people should start looking for one.

Yeah, I don't have a problem with AI and actually use it quite a bit. What I see as the problem is the unsustainable lending and the circular investing. The companies are using financial tricks that allow them to post numbers as revenue when there actually isn't any money being transferred. Someone says "here is 10 billion in stock, but you have to use that equity to purchase products from us" and suddenly there is 20 billion in revenue on there books. Then there stock price goes up based on numbers that aren't real. There is also lots of seller financing going on. it's the same 3 dozen companies passing the same fake money around to each other. They are all in debt to each other and debt isn't taxable so they dont have to pay taxes on their fake revenue.

While im all for using some financial tricks to pay less in taxes, what's going on on this scale is fraud that's stealing money from investors and manipulating stock prices. Im not against AI, it seems like that's what people get from my posts, im against the fraud that risks crashing the economy. AI is just the latest vehicle fraudsters are using to siphon money out of the economy. They were there during covid, they were there during 2008, they were there during dotcom bubble. The fraudsters never went away and they will be there in 8-10 years after the bubble pops looking for the next big thing. If you follow the money this becomes incredibly clear.

AI might be the next industrial revolution, but what does the start of every other revolutionary technology look like? From railroads, automobiles, electricity, the internet. Everyone wants in on it, a whole bunch of useless stuff gets created using said tech, it crashes and then the real winners are the people who pick up the assets of bankrupt companies for pennies on the dollar after the crash. I keep hearing "this time is different, its not like that." Well, the said the same thing about all the other bubbles. There are some useful products, but then I think about the AI powered dishwasher I saw at Home Depot. We are in the useless product phase of the bubble cycle. I have a friend who has the new LD AI OLED. The only AI feature is just a chat bot that's basically a user menu, it can't actually change settings or anything.

Here is something like to do sometimes. Pick a random object in your house and search for it with AI in the name. I used to do this when smart homes were the future and the IOT was next technological revolution. The funny thing is, most of the AI products I see have parallels to smart products I saw 10 years ago

 

[Loadedaxe]

I agree with most of that, especially the circular financing. When the same companies are investing in one another, lending money to customers and then counting the resulting purchases as demand, it becomes difficult to know how much of the market is actually real and sustainable.

I would be careful calling all of it fraud, though. Some of these arrangements are legal, but they can still create the appearance of stronger demand than really exists.

My bigger concern is how much of the wider economy is becoming tied to this. Retirement accounts, banks, utilities, construction and even economic growth are increasingly dependent on AI spending continuing at this pace. That's scary.

But it is also what makes this more dangerous than a few bad investments. If it unwinds, the losses will not stay inside the AI industry. Everyone is going to feel it.

And I agree completely about the “useless product” phase. When companies start putting AI into dishwashers and televisions just so they can advertise "Ai inside", it starts looking a lot like the smart home and IoT craze all over again.

 

[Neatfeatguy]

After claiming there is no AI bubble, Softbank boss quoted saying:

 

[Endymio]

... it will not only come in the form of hyperinflation of goods ( like today's computer parts),

Yet inflation as a whole is far lower than a few years ago, and far lower than the historical average for the US:

"...The annual core inflation rate in the U.S. is 2.6% for the 12 months ending in June, cooling down from 2.9% in May..."

....potential food shortages in the form of parasites and other microbiomes (

Except AI-based models are *increasing* food production ... and doing so with less water, fertlizer, and pesticide use.

Consider IBM a warning sign imo.

IBM is not considered an AI stock.