As dark clouds continue to gather over the stock market, and with fears of a ready-to-burst AI bubble growing, some investors are furious that anybody would even question the industry’s enormous valuations, astronomical spending sprees, and severely lacking financial model.
Many industry leaders have acknowledged that there’s likely a bubble. But as Axios reports, die-hard AI investors are furious at the suggestion.
“The reality is, the world’s not going to stop and AI is coming, so you have a choice, you could put your head in the sand or you can embrace it,” RedBird Capital Partners managing partner Gerry Cardinale said at an Axios event this week.
Others downplayed previous comparisons of the AI bubble to the dot-com implosion.
“‘The bubble’ is a pejorative term,” Sequoia Capital partner Roelof Botha said at this week’s event.
“You have so many industries that are relatively ossified and ripe for disruption,” he said. “And AI isn’t just a new distribution mechanism or a new interface. It is fundamentally a set of capabilities that can upend industries.”
Not everybody shares that kind of boisterous optimism, at least when it comes to the immediate future. Even Google CEO Sundar Pichai himself made headlines this week after telling the BBC in an interview that “there are elements of irrationality” in the current AI boom.
If a bubble were to burst, “I think no company is going to be immune, including us,” he said.
Hugging Face CEO Clem Delangue similarly said during this week’s Axios event that “we’re in a [large language model] bubble,” renaming the current phenomenon, “and I think the LLM bubble might be bursting next year.”
However, Delanuge opined that LLMs are “just a subset of AI.”
After a bruising couple of weeks, the stock market rallied on Wednesday ahead of AI chipmaker Nvidia’s earnings call, an anxiously-awaited litmus test that has made investors skittish as it approaches.
“They’re going to come in great, I suspect, but if they don’t, then there’s going to be a problem,” Certuity chief investment officer Scott Welch told CNBC of Nvidia’s earnings.
The S&P 500 jumped in early trading, but has since stabilized substantially lower than its late October record high.
But given the widespread discussions surrounding an AI bubble, investors are bound to ask some hard questions, given the now enormously expensive shares of tech companies.
“People are just starting to ask the question, as they should, ‘You guys are committing to spending trillions of dollars into your data centers and your AI capabilities and everything else, when are we going to see the results of that?” Welch told CNBC. “It’s not a question that they’re doubting them.”
“It’s just that it’s a question of timing,” he said, adding that the AI trade “may not go to the Moon tomorrow.”
More on the AI bubble: After Attempting to Short the AI Bubble, the “Big Short” Guy Suddenly Closes Up Shop
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