Still others are arguing that the pain will be widespread. Google CEO Sundar Pichai told the BBC this month that there’s “some irrationality” in the current boom. Asked whether Google would be immune to a bubble bursting, he warned, “I think no company is going to be immune, including us."
What’s inflating the bubble?
Companies are raising enormous sums of money and seeing unprecedented valuations. Much of that money, in turn, is going toward the buildout of massive data centers—on which both private companies like OpenAI and Elon Musk’s xAI and public ones such as Meta and Google are spending heavily. OpenAI has pledged that it will spend $500 billion to build AI data centers, more than 15 times what was spent on the Manhattan Project.
This eye-popping spending on AI data centers isn’t entirely detached from reality. The leaders of the top AI companies all stress that they’re bottlenecked by their limited access to computing power. You hear it constantly when you talk to them. Startups can’t get the GPU allocations they need. Hyperscalers are rationing compute, saving it for their best customers.
If today’s AI market is as brutally supply-constrained as tech leaders claim, perhaps aggressive infrastructure buildouts are warranted. But some of the numbers are too large to comprehend. Sam Altman has told employees that OpenAI’s moonshot goal is to build 250 gigawatts of computing capacity by 2033, roughly equaling India’s total national electricity demand. Such a plan would cost more than $12 trillion by today’s standards.
“I do think there’s real execution risk,” OpenAI president and cofounder Greg Brockman recently told me about the company’s aggressive infrastructure goals. “Everything we say about the future, we see that it’s a possibility. It is not a certainty, but I don’t think the uncertainty comes from scientific questions. It’s a lot of hard work.”
Who is exposed, and who is to blame?
It depends on who you ask. During the August press dinner, where he made his market-moving comments, Altman was blunt about where he sees the excess. He said it’s “insane” that some AI startups with “three people and an idea” are receiving funding at such high valuations. “That’s not rational behavior,” he said. “Someone’s gonna get burned there, I think.” As Safe Superintelligence cofounder (and former OpenAI chief scientist and cofounder) Ilya Sutskever put it on a recent podcast: Silicon Valley has “more companies than ideas.”
Demis Hassabis, the CEO of Google DeepMind, offered a similar diagnosis when I spoke with him in November. “It feels like there’s obviously a bubble in the private market,” he said. “You look at seed rounds with just nothing being tens of billions of dollars. That seems a little unsustainable."
Anthropic CEO Dario Amodei also struck at his competition during the New York Times DealBook Summit in early December. He said he feels confident about the technology itself but worries about how others are behaving on the business side: “On the economic side, I have my concerns where, even if the technology fulfills all its promises, I think there are players in the ecosystem who, if they just make a timing error, they just get it off by a little bit, bad things could happen."