"This is madness" Growing AI bubble debate… 'Father of ChatGPT' stern remarks

Growing U.S. stock market AI bubble debate… 'Madness' vs 'Bull market continues'

Pessimism is spreading that the artificial intelligence (AI) theme, which has driven the stock price rises of tech companies since 2023, may be in a bubble. Analyses are emerging that the results may be limited compared to the scale of corporate investment in AI. There have also been criticisms that the situation in which small companies are raising huge amounts of money is irrational.

On the 19th (local time) in the New York market, the Nasdaq index closed at 21,314.95, down 1.46% from the previous day. It is interpreted that accumulating pessimistic analyses about the AI industry stimulated investors' desire to sell. The previous day, a research team under the Massachusetts Institute of Technology (MIT) released a report pointing out, "Only 5% of AI pilot programs have generated value of millions of dollars, and the remaining 95% have produced no revenue." The analysis is that while companies are using customized AI tools, the majority of AIs do not provide practical help. According to Stanford, U.S. private AI investment grew from $47.4 billion in 2022 to $109.1 billion last year, more than doubling.

Added to this, Sam Altman, CEO of OpenAI, said the AI industry may be in a bubble, increasing investor anxiety. According to CNBC, in a recent interview with tech outlet The Verge he said, "It is true that investors are excessively excited about AI," and "the valuations of AI companies are already at uncontrollable levels." Altman reportedly mentioned the word 'bubble' three times in a 15-second remark. He also described the situation in which a startup with only three employees raises hundreds of millions of dollars as "madness."

As a result, tech companies with market capitalizations over $1 trillion, such as Nvidia (-3.5%), Broadcom (-3.55%), and Microsoft (-1.42%), all fell. Palantir, an AI defense contractor that recently reported strong earnings, also plunged 9.35% that day, extending a five-trading-day decline. The Financial Times (FT) said, "There was a time in January when the emergence of China's DeepSeek raised questions about U.S. companies' dominance of the AI market and semiconductor demand," adding, "The stock price has recovered, but this is a clear example of how sensitively investors react to negative news about AI." Apollo Global Management warned that the AI frenzy could exceed the dot-com bubble in scale.

However, some see the Nasdaq index, which has risen more than 40% since the April low, as simply taking a breather. Jason Bronchetti, Chief Investment Officer (CIO) at Lincoln Financial, said, "It is historically normal for the market to temporarily stop rising as it readjusts."

Wall Street's optimism about AI also remains. This is because major tech companies have recently reported results that beat market expectations and are expanding AI-related investment plans. Dan Ives, head of global technology research at Wedbush Securities, explained in an interview with Fortune, "(AI investment) is a situation in which trillions of dollars are being invested to build the infrastructure of the Fourth Industrial Revolution." He continued, "The AI revolution will drive a tech bull market over the next 2-3 years," adding, "This is the opportunity of 1996, not the collapse of 1999." The CIO of Saperstein Treasury Partners also predicted, "Large tech stocks will continue to lead the market and drive performance."

Reporter Han Kyung-je hankyung@hankyung.com