CNBC’s MacKenzie Sigalos joins Money Movers to discuss OpenAI’s $850 billion infrastructure build-out, Alibaba’s ramped-up AI spending, and the global race to meet surging demand.

The release of Open AI's ChatGPT has accelerated the development of artificial intelligence and warnings about its impact on society.

Rise of AI

Technology companies are rapidly increasing their investments in artificial intelligence infrastructure. OpenAI recently announced a build-out valued at $850 billion, described as the largest infrastructure push of the modern internet era, in response to a tenfold increase in demand over the past 18 months. CEO Sam Altman emphasized that such spending is necessary to keep up with the rapid growth and dismissed concerns about an investment bubble, noting that cycles of over- and under-investment are typical in technological revolutions.

Alibaba has also revealed plans to increase its AI spending, adding to the $53 billion already committed, and is expanding its data center presence internationally. The global AI investment race is particularly intense between the US and China, with US companies currently leading in spending. Alibaba aims to become more self-sufficient, especially as restrictions on Nvidia chip sales to China encourage domestic development. The market has responded positively to these investment announcements, with Alibaba shares experiencing significant gains.

Tech giants ramp up AI spending

The tidal wave of AI spending continues shares of Alibaba surging this morning after ramping up its AI Investment target and in just 48 hours open AI announcing a build-out equivalent to 17 nuclear reactors totaling 850 billion dollars in spending for today's tech check McKenzie Sagalos asked open AI CEO Sam Altman about the increased spend Mac Hey Leslie So roughly 50 billion dollars per gigawatt Open AI's projects from just the past two days add up to nearly half of the two trillion dollar global AI infrastructure surge HSBC now forecasts The scale is staggering even for a company raising a record amount of private market cash I spoke to open AI CEO Sam Altman in Abilene, Texas he called this the largest infrastructure push of the modern internet era and acknowledged that the 850 billion dollar build-out may look scary from the outside But argued that it's the only way to keep up with demand that's already grown tenfold in the last 18 months And this is what it takes to deliver AI AI unlike previous Technological revolutions or previous versions of the Internet. There's so much infrastructure that's required and this is a small sample of it Now Altman insisted the building boom is in response to soaring demand Noting that open AI is growing faster than any business that he's ever heard of He also pushed back on bubble fear saying yes, people will get burned But every past technological revolution has gone through cycles just like this People will get burned on over investing and people also get burned on under investing and not having enough capacity smart people will get overexcited and People will lose a lot of money people will make a lot of money But I am confident that long term the value of this technology is going to be gigantic to society Now one tech company that could be worried about under investing is Alibaba it just revealed plans to increase its spending on AI models and infrastructure development on top of the 53 billion dollars that it already committed to spending on its big AI push really Underscoring just how global this gen AI arms race has become guys Mac can you remind us just kind of where the the arms race sits with regard to u.s. Spending versus China? I mean It sounds like just based on what the hyperscalers are doing all the way through the supply chain for AI that the u.s. Is well ahead in terms of its spending and do we even have a clear picture of how much China is spending outside of the 53 billion or so that Alibaba Upped its target to today So Alibaba is one of those companies it wants to compete both as a hyperscaler potentially a chip maker and then it also has its Large language models part of this announcement was that they would have the latest version of when that's the name of their LLM But to your point, how does this spending compare? That's something that they didn't disclose yet the amount of money that they're going to be Adding on to that 53 billion dollar budget what we do know is that Alibaba is opening new data centers in Brazil France and the Netherlands and part of that has to do with Co-location wanting to be closer to where your end-user is so that the models move faster We also know that in China Tencent and Baidu have been competing with the model makers competing with the likes of anthropic and open AI CEO Eddie Wu of Alibaba really underlining this fact that they want to be more of a player in this hyperscaler Competition be more self-sufficient and you know what Nvidia being blocked from selling their chips into the country is really helping with them Helping them with that ambition I'll tell you what's really interesting Mac Is this we are clearly in an environment and you can look at a five-year Ababa where companies are being rewarded for spending a ton of money and that gets reflected in what China a large cap tech is done versus the S&P I mean Alibaba just had its best day its shares had its best day in four years. I'm looking at the K web right here It's up 3% Just today up 46% this year that is an ETF that tracks China's biggest internet names And so it is certainly an age where you putting these Blockbuster multi-billion dollar deal announcements out there and you're being rewarded in the stock market yesterday. I was out in Abilene, Texas Reporting on an expanded infrastructure bill between build with between the likes of SoftBank Oracle and open AI and the after hours we saw in video Which is also a part of this moving higher after selling off during the day Yeah, it definitely feels like the risk of under investing in this space is more Prominent than over investing McKenzie. Thanks for being all over it McKenzie sagalos

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Tech giants ramp up AI spending

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Rise of AI