'It's going to be really bad': Fears over AI bubble bursting grow in Silicon Valley [View all]

[Mr. Sparkle]

Source: BBC

At OpenAI's DevDay this week, OpenAI boss Sam Altman did what American tech bosses rarely do these days: he actually answered questions from reporters. "I know it's tempting to write the bubble story," Mr Altman told me as he sat flanked by his top lieutenants. "In fact, there are many parts of AI that I think are kind of bubbly right now."

In Silicon Valley, the debate over whether AI companies are overvalued has taken on a new urgency. Sceptics are privately - and some now publicly - asking whether the rapid rise in the value of AI tech companies may be, at least in part, the result of what they call "financial engineering". In other words - there are fears these companies are overvalued. Mr Altman said he expected investors would make some bad calls and silly start-ups would walk away with crazy money.

But with OpenAI, he told me, "there's something real happening here". Not everyone is convinced. In recent days, warnings of an AI bubble have come from the Bank of England, the International Monetary Fund, as well as JP Morgan boss Jamie Dimon who told the BBC "the level of uncertainty should be higher in most people's minds". And here, in what is often considered the tech capital of the world, concerns are growing. At a panel discussion at Silicon Valley's Computer History Museum this week, early AI entrepreneur Jerry Kaplan told a packed audience he has lived through four bubbles.

He's especially concerned now given the magnitude of money on the table as compared to the dot-com boom. There's so much more to lose. "When [the bubble] breaks, it's going to be really bad, and not just for people in AI," he said. "It's going to drag down the rest of the economy." However, at the Stanford Graduate School of Business, which has minted its fair share of tech entrepreneurs, Prof Anat Admati says while there have been many attempts to model when we're in the bubble, it can be a futile exercise. "It is very hard to time a bubble," Prof Admati told me. "And you can't say with certainty you were in one until after the bubble has burst." But the data is concerning to many. AI-related enterprises have accounted for 80% of the stunning gains in the American stock market this year - and Gartner estimates global spending on AI will likely reach a whopping $1.5tn (£1.1tn) before 2025 is out.

Read more: https://www.bbc.com/news/articles/cz69qy760weo