The AI market attracts huge investments, but at the same time raises more and more doubts. The market value of the 10 largest AI startups increased by nearly $1 trillion. during the year, even though their products often do not generate profits. As CNN's Allisow Morrow notes, if the bubble bursts, the consequences could be serious — both for investors and the economy as a whole.
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“We are in the largest and most dangerous bubble the world has ever seen” – said Julien Garran, an analyst from MacroStrategy Partnership, in his report. In his opinion current investment in AI is 17 times greater than during the dotcom bubble and four times greater than before the 2008 housing crisis. “This is a misallocation of capital that could have disastrous consequences,” added the analyst quoted by CNN
The analyst points out the limitations of large language models (LLM) such as ChatGPT. He argues that their use is limited and that the costs of further development are increasing exponentially. “We haven't seen any significant progress since ChatGPT 4 launched in March 2023” – he notes. In his opinion, AI can replace some “nonsense professions”, but it does not bring real added value.
The AI bubble is 17 times bigger than the dotcom bust?
According to Garran, funding for AI startups is starting to wane. “Many venture capitalists are withdrawing because valuations are too high,” says an analyst quoted by CNN. In his opinion, only companies such as Nvidia that provide AI equipment generate profits. The rest of the industry relies on a constant infusion of capital, which may not be sustainable.
The Financial Times wrote that 10 artificial intelligence startups — none of which made a single dollar in profit — gained nearly $1 trillion in the last 12 months. values market.
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Garran believes that while the AI market continues to grow, it is approaching a tipping point. “It's only been a week since record valuations, but we're getting closer to the top,” he says. If investors stop financing unprofitable projects, the entire industry may collapse.
