You might not think an Adelaide resume writer cares much about AI. So far all I’m seeing is an avalanche of AI slop. Even so, in the future it will pay an important part, especially in medicine. But that’s not the main problem. There’s an insane amount of money being invested in AI across the world. If that bubble bursts, there goes tens of thousands of jobs, major infrastructure projects and much more.
In Silicon Valley, the debate over how much AI companies are overvalued has taken on a new urgency.
People in the know are asking whether the rapid rise in the value of AI tech companies may be the result of what they call “financial engineering” – that these companies are seriously overvalued.
Tech companies are projected to spend about $400 billion this year on infrastructure to train and operate AI models. That is more than any group of firms has ever spent to do anything.
The Apollo program allocated about $300 billion in inflation-adjusted dollars to get America to the moon between the early 1960s and the early 1970s. The AI buildout requires companies to collectively fund a new Apollo program, not every 10 years, but every 10 months.
Punters are betting AI will create capabilities of some kind of “artificial superintelligence” that can do everything a human can do – or more.
This could raise the living standards of everyone on Earth. Leading computer scientist Stuart Russell estimates the value of that at US$14 quadrillion– investors are gambling on that outcome too.
In recent days, warnings of an AI bubble have come from the Bank of England, the International Monetary Fund and JP Morgan. The data is concerning.
AI-related enterprises have accounted for 80% of the gains in the American stock market this year and spending on AI is likely reach a whopping $1.5tn (£1.1tn) before 2025 is out.
OpenAI, which brought AI into the consumer mainstream with ChatGPT in 2022, has entered into a $100bn deal with chipmaker Nvidia, which is itself the most valuable publicly traded company in the world.
Open plans to purchase billions of dollars of equipment for developing AI from Nvidia rival AMD, in a deal that could make it one of AMD’s largest shareholders.
Then there’s tech giant Microsoft and cloud computing behemoth Oracle which have a $300bn deal with OpenAI.
Some insiders are calling the deals “circular financing” or even “vendor financing” – where a company invests in or lends to its own customers so they can continue making purchases.
it’s unprecedented for companies to be growing revenue this fast.
Today’s market is driven overwhelmingly by momentum, as retail investors pile into meme stocks and AI companies because they think everybody else is piling into meme stocks and AI companies.
It’s very reminiscent of the dot.com bubble of 2000-2003