Isn't this the classic overcapacity leads to lower prices that also represses investments that would increase capacity. But those lower prices also stimulate new demand that lead to higher prices...which then motivate investments that increase capacity?

Perhaps I'm just spoiled because I live in the PNW, where are best use for overcapacity was to ship power off to California. But in the past, cheap hydro attracted aluminum production that then attracted also attracted a whole airplane production industry.

I think most people are just debating whether the extra demand generated by AI is worth it, they weren't necessarily debating the same thing when it came aluminum or airplane production (albeit in the 1930s).