As the world becomes increasingly reliant on artificial intelligence (AI), the race to build out the necessary infrastructure is heating up. While power constraints, permits, and political delays may slow the buildout, they won’t necessarily stop it. In fact, some locations are actively courting AI infrastructure with aggressive incentives. Mississippi, for example, is making a concerted effort to attract AI companies.

However, there is a larger risk on the horizon: oversupply. As inference costs continue to drop due to optimization and smaller, specialized models, the demand for compute power may not keep pace. This could lead to an oversupply of AI infrastructure, which could have significant implications for the industry as a whole.

While the idea that compute can’t be built may seem alarming, the bigger concern is actually the efficiency gains that are outpacing demand growth. As the industry matures, it’s possible that efficiency improvements will continue to drive down costs, making it more difficult for companies to justify the investment in new infrastructure.

In order to mitigate this risk, companies will need to focus on innovation and differentiation. This could involve developing new applications for AI, creating more efficient models, or finding new ways to monetize existing models. By staying ahead of the curve and continuing to drive innovation, companies can ensure that they remain competitive in an oversupplied market.

Ultimately, the race to build out AI infrastructure will continue to be a key driver of the industry’s growth. While there are certainly risks to be aware of, the potential rewards are too great to ignore. By staying focused on innovation and differentiation, companies can navigate the challenges and capitalize on the opportunities that lie ahead.