#ai-bubble

#ai-bubble

Step aside, Elon Musk vs. Sam Altman. There's a new beef in the business world, and it centers on the stock market's biggest question: Is the AI boom a bubble? Michael Burry of "The Big Short" fame and Palantir CEO Alex Karp have been trading barbs after the investor revealed he bet on Palantir's stock to plunge last quarter. The pair's clash boils down to a fundamental difference in views that's a microcosm of the market's big divide.

First, defense contractors selling AI products or services may revert to an earlier tendency to re-package AI technologies under more palatable monikers, like "data analytics." Second, national defense organizations in the United States and elsewhere may take up the mantle of basic AI research & development suitable for their own ends, capturing the value left in the bubble's wake.

The concerns around an Artificial Intelligence bubble basically center on whether the massive investments flooding into artificial intelligence can justify their enormous costs and deliver on their transformative promises. Critics worry that the sector is experiencing irrational exuberance reminiscent of the dot-com boom, with tech companies spending hundreds of billions on AI infrastructure, startups commanding sky-high valuations based on potential rather than actual profits, and enterprises rushing to implement AI solutions without clear use cases or a clear return on investment.

With all the chatter and commentary about the internet (or dot-com) bubble burst and even the great stock market crash of 1929, it's quite an unsettling time to be an investor in the markets, as the S&P nears new highs after a 2.3% gain for the month of October. For the tech-heavy Nasdaq 100, it was an even brighter month, with the index nearly rising 5% in a month.

The S&P 500 and NASDAQ futures are trading down over 1% on Tuesday, following Palantir's 6.9% decline despite beating earnings expectations and giving strong forward guidance. Concerns over an AI bubble continue to mount. Tuesday's sell-off follows a wild start to the week, during which the Dow Jones Industrial Average traded lower due to weakness in Merck Inc. (NYSE: MRK) and UnitedHealth Group Inc. ( NYSE: UNH).

Suddenly, and not long ago, our dearest tech industry leaders began to suggest caution. Sam Altman said that AI is in a bubble "for sure," albeit one formed around "a kernel of truth." Mark Zuckerberg said an AI bubble "is quite possible," though "if the models keep on growing in capability year over year and demand keeps growing, then maybe there is no collapse, or something." Even Eric Schmidt is saying to calm down about artificial general intelligence and focus on competing with China.

"In the end, something very profound happened. The world was very different," Gates said. "Some companies succeeded, but a lot of the companies were kind of me-too, fell behind, burning capital companies."

OpenAI CEO Sam Altman's comments helped spark concerns about an AI bubble.

It's becoming clearer that we are in a perilous financial situation globally. Fears over an "AI bubble" are being cited by the Bank of England, the International Monetary Fund and the boss of JP Morgan, Jamie Dimon. If you want a sense of how insane the narrative is around AI investments, consider this: Thinking Machines Lab, an AI startup, recently raised $2bn funding on a valuation of $10bn. The company has zero products, zero customers and zero revenues. The only thing it made public to its investors was the resume of its founder, Mira Murati, formerly chief technology officer at OpenAI. If that's not hubris meeting market exuberance, what is?

"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."

No matter how much is said about the hundreds of billions of dollars hovering over the tech industry's head like an anvil in the "AI bubble," it just won't pop. Not only is it refusing to budge, but it's growing by the day. The AI bubble is getting so bad, in fact, that it's making previous market bubbles look like chump change.

His far-sighted blend of tech criticism and class analysis has found Doctorow time and again at the bleeding edge of commentary on our techno-capitalist society. In many ways, his screeds on topics like tech broligarchs and enshittification broke the mold to allow room for the kind of tech-critical reporting being done by media projects like Tech Policy Press and , or the podcasts" Tech Won't Save Us," and " Better Offline."

I think it is both true that AI will transform the economy, and I think it will, like the internet, create huge amounts of economic value in the future,

"When bubbles happen, smart people get overexcited about a kernel of truth," Altman recently told reporters, per The Verge. Altman said this describes the state of play. "Are we in a phase where investors as a whole are overexcited about AI? My opinion is yes. Is AI the most important thing to happen in a very long time? My opinion is also yes," he said.

Big names in Silicon Valley collectively seem to be saying the same thing abut the AI boom lately, namely that it is looking more and more like a bubble, and that the rush to AGI (artificial general intelligence) may be very misguided. The Wall Street Journal has a report today that Meta's widely buzzed-about AI hiring spree is coming to an abrupt halt, likely due to scrutiny by high-profile investors who are balking at the massive sums being thrown at poached AI researchers and engineers.

Altman noted, "When bubbles happen, smart people get overexcited about a kernel of truth." He elaborated that while AI has great potential, investors are too optimistic.