In this article, we delve into the pressing concerns surrounding the potential government bailout for the artificial intelligence (AI) sector. There are growing worries about the financial implications of supporting an industry that has already attracted significant investment. Despite assurances from various authorities, recent developments suggest that political and financial pressures may influence future funding strategies. It is essential to critically examine these dynamics as they unfold.
Yves here. This high-level recap highlights how the controversial notion of an AI bailout is being repackaged to seem more palatable. Recent news emphasizes the idea that this could become another financial burden placed on taxpayers, catering to the wealthiest and most reckless, even as opposition rises. Notably, the Financial Times has reported that investors are increasingly hesitant to engage with AI-related debt, particularly when borrowers have funds readily available. In Georgia, a political shift has occurred, with Democrats successfully securing two positions on the state power commission board, marking the first Democratic victories in statewide constitutional roles since 2006. These candidates emphasized affordability in their campaigns, highlighting public concern. As a report in Georgia Reporter indicates, “A PowerLines/Ipsos poll found that 3 in 4 Americans are concerned about rising utility bills.”
By Kurt Cobb, a freelance writer and communications consultant who writes frequently about energy and the environment. His work has appeared in The Christian Science Monitor, Resilience, Le Monde Diplomatique, TalkMarkets, Investing.com, Business Insider, and many other platforms. Originally published at OilPrice
- Despite denials from Washington and industry leaders, executives are already discussing government “backstops” and indirect support.
- OpenAI is facing financial commitments well beyond its revenues, casting doubt on its long-term sustainability.
- Subsidized data centers and escalating energy costs illustrate how public resources are already facilitating the AI boom and hint at a looming bailout.
There’s a familiar adage in Washington: Don’t trust anything until it’s officially denied. With the Trump administration’s AI czar, David Sacks, asserting that “[t]here will be no federal bailout for AI,” speculation regarding what that might look like is already in motion.
Interestingly, OpenAI’s CFO, Sarah Friar, has suggested that federal guarantees may be necessary for significant investments to maintain American leadership in AI. Following backlash from Sacks, Friar clarified her comments on LinkedIn, stating that she had “muddied” her message. She hinted that government involvement is still crucial for AI leadership, closely paralleling her earlier comments in The Wall Street Journal.
This raises an important question: Why does an industry as lucrative as AI, which commands hundreds of billions in investments, require federal assistance? AI expert Gary Marcus predicted 10 months ago that the sector would seek a governmental bailout to offset overspending and miscalculations. In a recent podcast, OpenAI’s CEO, Sam Altman, struggled to address queries about reconciling the company’s $13 billion annual revenues with its staggering $1.4 trillion spending commitments. Notably, he failed to provide a satisfactory answer.
What justifications might the AI sector concoct for government support? Historically, appealing to fears of China has been an effective tactic in Washington. Altman’s recent remarks echo this sentiment, urging that the U.S. must “beat China.” However, this rationale begs the question of why OpenAI should be favored for federal funding over other companies. In apparent damage control, Altman asserted on his X account that OpenAI is not seeking direct federal aid, although he did suggest that the government could provide indirect support by developing data centers that AI companies could lease, avoiding up-front capital investments.
Perhaps I’m mistaken in interpreting these discussions as preliminary negotiations between the AI sector and the federal government regarding potential subsidies or bailouts. However, it’s important to recognize that the AI industry has not advanced without government support. The AP has reported that over 30 states are already providing subsidies to attract data centers. Nevertheless, not all communities welcome these developments, as demonstrated. Furthermore, the presence of these data centers has led to increased electricity rates, stirring competition between consumers and AI companies for energy resources, effectively placing the burden on current electricity customers to finance the infrastructure needed for these centers.
The overarching issue with AI is its apparent limitations, which may hinder its ability to take over tasks traditionally performed by humans and prevent integration into critical systems due to frequent error rates. These uncertainties have drawn criticism that refutes the lofty claims made by AI proponents as examined by AI critic Ed Zitron.
I increasingly view AI through the lens of a boondoggle. According to Dictionary.com, a boondoggle is “a wasteful and worthless project undertaken for political, corporate, or personal gain.” Thus far, the AI sector largely fits this definition. Extending the definition as articulated by Dmitri Orlov, author of Reinventing Collapse, we see that a true boondoggle not only wastes resources but might also create additional challenges that necessitate further misguided projects—such as the demand for new electric generation facilities that may prove redundant if AI fails to meet its hype. While AI advocates predict significant societal impacts, I agree with that assertion, although perhaps not in the manner they intend.
