AI Infrastructure Isn’t a Bubble, Mike Alfred Says — But Owning GPUs Is a Bigger Bet

Mike Alfred has a blunt answer for investors asking whether the rush to build AI infrastructure has become a bubble.

“There’s no bubble, so you don’t have to ask,” the Alpine Fox founder and managing partner said during a fireside chat at the inaugural Energy Investors Forum last week in Dallas.

His comments came at a time when the AI Infrastructure Growth Index tracked by TheEnergyMag had retracted by over 20% over the past month as of Friday, underscoring a recent pullback in sentiment across the sector and providing the backdrop for renewed debate over whether the AI buildout has entered bubble territory.

Alfred’s case is less about guessing which AI application will prevail than about owning what every contender needs: power, land, cooling and data-center capacity. He expects that physical buildout to continue for another 20 to 30 years, interrupted by market crashes and economic downturns but sustained by rising demand for computing.

The more immediate divide for bitcoin miners trying to capture that demand, he said, is whether they also own the graphics processing units inside their facilities.

“If you choose to own them, you better have a good reason why,” Alfred said. “It’s potentially more lucrative, but also potentially more risky.”

That distinction is becoming increasingly important as miners recast themselves as AI-infrastructure companies. Owning the GPUs can give an operator more revenue and control, but it also brings the cost of the hardware, the risk that chips become obsolete, and the need to keep them occupied. In a colocation arrangement, by contrast, the tenant owns the servers and chips while the developer supplies the building, power, water and cooling.

“That model looks more like a REIT,” Alfred said. “It looks more like a real-estate business. It’s much more conservative. It’s easier to finance.”

It’s worth noting that Alfred speaks from a position of significant financial exposure. He is a non-executive director of IREN with financial holdings of the company, which not only owns data center infrastructure but also GPU hardware. During the EIF session, he said roughly 80% of his fund was concentrated in IREN and Cipher Digital (NASDAQ: CIFR).

The concentration matters because Alfred’s argument is also a thesis for the revaluation of those companies. Both began with bitcoin mining and have since secured large AI deals at Texas sites where access to electricity is the scarce asset.

IREN in November announced a five-year agreement valued at about $9.7 billion to provide Microsoft Corp. with AI cloud infrastructure using Nvidia Corp.’s GB300 chips. Cipher announced a 10-year colocation agreement with AI cloud company Fluidstack covering 168 megawatts at its Barber Lake site in Texas.

Those contracts illustrate Alfred’s description of selected miners moving “from a speculative business on the commodity price of bitcoin to now a contractual, repeatable business based on AI.” They do not eliminate risk. Projects still have to be financed, built, energized and delivered on time, and the value of a long-term contract depends heavily on the tenant’s ability to pay.

Alfred said a facility leased to Microsoft or another highly rated hyperscaler should be easier to finance than one dependent on a younger AI laboratory. Yet he also sees a trade-off: operators working with companies at the frontier may learn more about how next-generation infrastructure needs to be designed.

The physical layer, in Alfred’s view, will capture more value from AI than it did during the internet era. Early web users tolerated slow connections and rudimentary infrastructure because the applications were novel. AI customers expect high performance from the outset, and developers increasingly optimize software around chips, networking and facility design.

“The value of the physical side of the AI business is much greater than the internet data-center business,” he said.

That view puts Texas at the center of the investment case. “I think Texas is Mecca,” Alfred said. “I think Texas is the most important data center market in the world.”

Alfred acknowledged that the expansion will not move in a straight line. He expects periodic crashes to revive warnings that the industry is overbuilt. He nevertheless compared the adoption curve with the internet and invoked Jevons paradox—the idea that more efficient computing can lower its cost enough to stimulate even greater total consumption.

“It’s always a probabilistic exercise,” Alfred said. “Nobody knows for sure.”