Copyright Bloomberg
The modern artificial intelligence boom has created a boom in financial engineering. A lot of people who run big tech companies and AI labs think that they will collectively need to spend trillions of dollars over the next few years building data centers to train and run AI models, buying chips to put in those data centers, buying electricity to run those data centers, and building power plants to provide that electricity. Trillions of dollars is a lot of money for anyone, but particularly for big tech companies like Meta Platforms Inc. and Alphabet Inc., which started out as venture-backed software companies. The model there is well known: You start in a garage, you promise to change the world, you raise equity financing from venture capitalists who believe in your vision, your vision works, you scale up rapidly with very low marginal costs (just serving another web page), and eventually you become giant and profitable. When you are giant and profitable, (1) your venture capital investors get very rich and (2) you have a lot of free cash to spend on weird moonshot projects but also on the costs of running your now-quite-capital-intensive business. That is, you have a lot of cash to build data centers to serve all your web pages.
