Zoho’s Sridhar Vembu signals caution on major AI infrastructure investments

Zoho founder Sridhar Vembu has said the company will hold off on major artificial intelligence (AI) infrastructure investments until market conditions become more stable, even as businesses pour billions into the technology.

Vembu made the remarks in response to a post by American venture capitalist Chamath Palihapitiya, who questioned the sustainability of spending in the current AI boom.

“As a rule, we have stayed away from monster-bets-on-other-people's-money approach to business,” Vembu wrote on X. He said Zoho would continue investing in AI research and development but would wait before committing heavily to infrastructure. “We are investing in foundational R&D in AI but will await a less bubblicious time to invest in infrastructure,” he added.

The comments suggest that Zoho intends to build its AI capabilities without rushing into large investments in computing infrastructure, including chips and data centres, while the market remains overheated.

Palihapitiya had argued that AI spending is heavily concentrated among a small number of companies and relies substantially on venture capital-funded startups that are yet to become profitable.

He claimed that 1% of companies account for 90% of AI spending, with 80% of that spending coming from unprofitable, venture-backed businesses. He also estimated that 70% to 75% of every dollar spent on AI comes from AI companies using venture capital funding.

Palihapitiya compared the current situation with the early days of cloud computing, when venture-backed startups were among the early customers of services such as Amazon Web Services.

He argued that the AI industry needs to demonstrate more consistent demand reflected in the earnings of publicly traded companies.

The concerns come as companies invest heavily in computing power and data centres to develop and deploy AI systems, even as questions remain over the long-term returns from these investments.