It's exaggerated, yes. It's not gross.
It's basically an arms race for a future AI war that probably won't happen.
Sort of like how armies were bankrupting themselves building battleships before WW1... which turned out to not be a sea war at all.
The fear 'losing out' on AI is making companies, and people, totally irrational. All the big players are paranoid that one of the other ones is going to 'get head' of AI market and become a monopoly, just like it was in the past with Google and search, or Apple and the iphone, etc. So crazy stupid expenditures and these massive data center plans now are considered a necessity.
But you are correct the AI demand... simple isn't there and probably won't materialize and the bubble will collapse.