Trillions are being ‘wasted’ on the AI boom, Arthur Hayes says. He’s betting on what comes next

CHINA - 2023/11/03: In this photo illustration, the cryptocurrency electronic cash Bitcoin (BTC, BCH) logo seen displayed on a smartphone with an Artificial intelligence (AI) chip and symbol in the background. (Photo Illustration by Budrul Chukrut/SOPA Images/LightRocket via Getty Images)

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Former BitMEX CEO Arthur Hayes is betting that the artificial intelligence boom will eventually produce a familiar outcome: too much investment, a crash and, ultimately, a bailout that sends crypto higher.

Hayes, co-founder and chief investment officer of crypto investment firm Maelstrom, said in response to questions from CNBC at the Gamma Prime Investing Conference in Singapore that humanity is "wasting multi-trillion dollars" on building AI data centers.

The massive data center buildout would ultimately make computing power "extremely cheap and extremely plentiful," Hayes said.

The bet runs against the massive investment pouring into AI infrastructure, as technology companies race to secure the computing power needed to develop and run increasingly advanced AI models. Hayes sees that buildout eventually becoming overcapacity, setting the stage for a downturn that he expects will ultimately benefit crypto.

"If you study financial history and you study every single major technological rollout, it always is overbuilt. There always is a crash, and there always is a bailout," Hayes said.

Investors who position for those bailouts stand to benefit, Hayes said, pointing to the aftermath of the 2008 financial crisis and other episodes over the past two decades.

"Thankfully, we have bitcoin and other crypto to soak up that excess liquidity, and so we know the asset that's going to perform the best when the bailout comes," Hayes said, adding that "you just have to be patient."

That could come in late 2027 or 2028, when much of the new data center capacity is delivered, according to Hayes.