by Carl Tannenbaum, Chief Economist, Northern Trust
We had a data center at my first banking job. It was a dusty room filled with old Federal Reserve Bulletins, Economic Reports of the Presidents, and annual reports from the International Monetary Fund. I was the search engine, and the operation was powered by caffeine.
Today’s data centers are massive structures that are free of dust, host massive artificial intelligence (AI) engines, and are powered by everything under the sun (and the sun itself). Data centers have contributed significantly to economic activity, but they are encountering resistance which may bound the AI revolution.
The application of AI involves tokens, which are basic building blocks of data that large language models use to read and generate text. The more complicated the query or task, the more tokens that are required to respond. As AI has been applied to more (and more intricate) exercises, the demand for tokens has skyrocketed.
As AI usage advances, token production will have to increase commensurately. The construction of data centers, which are essentially token factories, will have to keep pace.
Global resistance to data center construction is growing, however. Local opposition has been driving new regulation and has halted a number of projects. Specific concerns involve land use and the consumption of electricity and water, but more general concerns about the impact of AI on society are in the background. Legal and political battles over data centers loom on the horizon.
AI and the infrastructure supporting it have been central to economic and market progress. Anything that slows momentum could have an impact on both fronts. Earthly limits may curb the ethereal expectations surrounding AI.
Not long ago, we moved offices. I was told that there was a closet owned by the economics department whose contents needed to be packed or pitched. Inside were shelves of dusty old reference materials that evoked a series of memories. I kept a few tomes as keepsakes, but chose to discard the rest. Today, the room is full of servers, calculating our futures.
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