Prominent venture capitalist Josh Wolfe, co-founder of Lux Capital, has issued a stark warning against what he describes as "slippery slope snake oil flapdoodle" in the burgeoning field of AI data center development and its associated energy infrastructure. Wolfe's strong criticism, voiced recently on social media, underscores growing concerns within the investment community regarding potentially irrational and speculative capital flows into this rapidly expanding sector.
In a tweet, Wolfe stated, > "Seriously shame on anyone funding or encouraging this bullshit. No doubt there is demand --but this isn't peddling entertainment, it's encouraging slippery slope snake oil flapdoodle We ought desire an informed, educated, rational --and not naive, gullible, superstitious society." While not explicitly naming the target of his ire in the tweet, his recent public comments suggest a focus on the energy solutions proposed for AI's immense power demands.
Speaking at an Axios AI Summit in early June, Wolfe compared the current build-out of data center infrastructure to previous market bubbles, specifically citing the fiber-optic networking and cloud computing booms. He raised a particular flag on the speculative capital flowing into energy provision for these data centers, including investments in small modular reactors (SMRs). This highlights his concern that some investments may be driven by hype rather than sound fundamentals.
The demand for electricity from AI-optimized data centers is projected to more than quadruple by 2030, according to the International Energy Agency (IEA). Data centers, currently accounting for approximately 1.5% of global electricity consumption, are expected to double their energy use by 2030, with AI being the primary driver. Goldman Sachs Research further estimates a 165% increase in global power demand from data centers by the end of the decade compared to 2023, placing significant strain on existing power grids.
Small modular reactors (SMRs) are being explored as a potential solution to meet the insatiable energy demands of these new AI facilities. However, the deployment of SMRs faces considerable hurdles, including regulatory complexities, lengthy construction timelines, and high initial costs, making their widespread adoption for data centers a speculative venture. The rapid pace of data center construction often outstrips the slower development of new energy infrastructure.
Wolfe's call for an "informed, educated, rational --and not naive, gullible, superstitious society" reflects a broader sentiment among some investors to exercise caution. His firm, Lux Capital, is known for its focus on deep technology and long-term, contrarian investments. His warning serves as a reminder to scrutinize the underlying viability and long-term implications of investments in sectors experiencing hyper-growth, particularly when they rely on unproven or highly speculative solutions.