OpenAI's Warning: The AI Bubble's Burst in Sight?

The artificial intelligence (AI) sector has been on a meteoric rise, with OpenAI's ChatGPT revolutionizing the industry and driving demand for Nvidia's graphics processing units (GPUs). However, recent developments suggest that the AI bubble may be nearing its peak, raising concerns about the future of the sector and its impact on Nvidia's stock.

OpenAI's latest model, Orion, was designed to replace GPT and take a significant step forward. However, the model has failed to meet the company's performance targets, casting doubt on the anticipated advancements in AI. Other AI startups, such as Alphabet's Gemini and Anthropic's Claude 3.5 Opus, have also faced challenges in meeting internal expectations.

The primary reason for these setbacks is the scarcity of new, high-quality training data. As earlier models have exhausted resources like Wikipedia, social media, and news sites, AI companies are struggling to find fresh sources of substantial training data. Margaret Mitchell, chief ethics scientist at AI startup Hugging Face, has even suggested that the "AGI bubble is bursting a little bit."

The law of diminishing returns seems to be hitting large language models (LLMs), which could lead to a slowdown in the AI sector's growth. Nvidia, a key player in the AI ecosystem, may be particularly vulnerable to this slowdown. While the company's stock has shrugged off the news thus far, investors should be mindful of the potential impact on Nvidia's growth if AGI turns out to be further away than anticipated.

Nvidia is set to report third-quarter earnings on Wednesday, and analysts expect another blowout round of results, with a consensus calling for 82% revenue growth to $32.9 billion. However, if the challenges with AI model scaling persist, Nvidia's stock could feel the impact at some point.

The AI sector's growth may also slow, potentially reeling in inflated stock valuations across the tech sector. As the AI bubble appears to be bursting, investors should remain vigilant and consider the potential implications for their portfolios.



In conclusion, the AI sector's recent setbacks and the scarcity of high-quality training data raise concerns about the sustainability of the current AI bubble. While Nvidia's stock has thus far remained resilient, investors should be aware of the potential risks and monitor the company's earnings closely. As the AI sector evolves, it will be crucial for investors to adapt their strategies and consider alternative use cases for existing models to maintain their competitive edge.