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AI companies continue to pour hundreds of billions of dollars into enormous infrastructure projects, fully expecting demand for their services to spike in the coming years to justify their outsize investments.
Reality, however, continues to have a lot of catching up to do. Revenues are still being dwarfed by astronomical capital expenditures as the gulf between the tech industry’s lofty promises of an AI utopia and what the tech is actually capable of today continues to grow. And persistent fears over an AI bubble that could wreck the entire US economy if it were to collapse continue to nag Silicon Valley investors and analysts.
Bill Gurley, a venture capitalist and general partner at the financial services company Benchmark, warns that the industry is still in for a rude awakening — a hard “reset” that could hit markets hard.
“One day we’re going to have an AI reset, because waves create bubbles, because interlopers come in,” he told CNBC on Monday. “When people get rich quick, a whole bunch of people come in and want to get rich too, and that’s why we end up with bubbles.”
“One day, I just think we trip and run out of money on those things,” he added. “I do think that moment stands in front of us.”
As AI companies continue on their unprecedented spending spree, it could soon become difficult to turn things around and become profitable once many billions of dollars in debt.
“I just think it’s harder to land the plane,” he said.
Gurley is far from alone in warning of an imminent AI bubble collapse. Investors have warned of a “reckoning” at which point the winners and losers could finally emerge.
Former Goldman Sachs head Lloyd Blankfein, who oversaw the bank through the subprime mortgage crisis, similarly warned earlier this month that it’s time to start preparing for a major jolt to the system reminiscent of the 2008 one.
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