AI Bubble Warning: Industry Veteran Predicts 25%+ Valuation Adjustments

An industry veteran has warned that the current frenzy around artificial intelligence (AI) could lead to the largest bubble in private technology investment to date, potentially triggering adjustments in the valuations of startups. The executive, who is also a long-serving director at the family office of billionaire entrepreneur Peter Thiel, made these remarks during an interview at the SuperReturn Conference in Singapore.

The executive highlighted that consumers are becoming accustomed to using AI services at prices significantly lower than their actual cost. "At some point, it will have to be priced according to cost, and there might be some profit margin left. While we are not there yet, it will come soon," the executive stated. The executive also noted that a significant amount of venture capital has been pouring into the global market, seeking companies that could develop the next transformative AI product. However, the executive cautioned that valuations might be pushed too high, while profitability has not kept pace.

Drawing a parallel to the internet bubble burst 25 years ago, the executive pointed out that there is an oversupply of AI companies worldwide, both large and small. Similar to the past, once the AI bubble bursts, "many, many" companies will struggle to survive. The executive emphasized that investors could lose hundreds of billions, or even trillions, of dollars.

Other tech industry figures have also acknowledged that AI investors may face pain in the future due to the rapid rise in valuations, while the monetization process is still in progress. The chief executive of OpenAI recently noted similarities between the current AI investment frenzy and the internet bubble. A report from a Massachusetts institute indicated that 95% of generative AI projects in the corporate world have not generated any profits.

The executive concluded by stating, "There are fascinating stories everywhere about how AI can grow into a giant tree. If you got in early, that's great. But if you are just getting in now, it might not be so great."