Analysts and industry leaders are starting to sound both optimistic and cautious about the artificial intelligence (AI) industry’s boom. Where some see indications of irrational exuberance, others are still bullish on the long-term promise that AI holds. Famed influencers like Sam Altman, CEO of OpenAI, and famous technological analyst Dan Ives have ignited firestorms of debate. Their remarks have sparked a vigorous debate among the technology community.
In a recent interview, Sam Altman emphasized the potential risks associated with AI investment, explicitly mentioning the word “bubble” three times in a span of just 15 seconds. He acknowledged that the market is showing “a little bit of froth.” He cautioned that if the current hype doesn’t translate into something sustainable, many investors might be left “very burnt.”
Altman stated, “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.” His comments encapsulate the dual nature of the current AI landscape—excitement about technological advancements juxtaposed with caution regarding speculative investments.
Dan Ives, an IT analyst at Wedbush Securities, pointed to an extraordinary spike in demand for AI infrastructure. Even in normal times, over the last few months, this demand has spiked 30%-40%. He dubbed the spike a “2019 moment for the AI industry.” He proposed that increasing spending on the development cycle of AI technology indicates just how vital it is thought to be. At the same time, he cautioned that troubling indicators remain.
Put these together, and Joe Tsai, the billionaire co-founder of Alibaba, raised all the right questions. He questioned whether all the new spending being dumped into AI is really necessary. Tsai raised concerns about companies constructing data centers “on spec,” without any demonstrable existing demand for their service. He voiced amazement at the level of spending being proposed, calling it, “so nuts, it’s so irresponsible.”
Altman asserted, “You should expect OpenAI to spend trillions of dollars on datacenter construction in the not very distant future.” OpenAI’s extremely ambitious plan is a clear demonstration of the company’s commitment to ramping up its capabilities as AI has demonstrated its strong potential across multiple applications.
And while concerns about technology are widespread, Altman is still excited about the long-term societal benefits AI could bring. He thinks whatever long-term good they do will swamp the present market froth. “The actual impact over the medium and long term is actually being underestimated,” said Ives, echoing Altman’s sentiment.
To Altman’s credit, he identified a major change in how companies are now run. Unlike previous cycles, they’re doing it by financing their infrastructure spending with serious cash flow rather than with debt. This trend can partly protect against some over-leveraging risks, which marked previous technology rides such as the dot-com bubble. Rob Rowe, another industry expert, remarked, “Back then, you had a lot of over-leveraged situations. You didn’t have a lot of companies that had earnings.”
The picture is made even murkier by new developments from OpenAI as they continue to push the AI investment narrative. According to SEC filings first reported by The Verge, an OpenAI employee has plans to sell $6 billion worth of stock to SoftBank and other investors. This transaction in particular has sent ripples throughout the nonprofit world and raised important questions about the motivations and implications behind such massive stock movements.
In the wake of these, Altman doubled down on his belief that we’re in a technological progress cycle. He said, “You know what, just leave us alone to do our thing. That was a signal to him that OpenAI should try to figure this all out by itself. Of course, he’s aware of the potential for an AI bubble. Despite the above, he remains optimistic about OpenAI’s trajectory and its potential to accelerate innovation.