ChatGPT is more popular than ever, but is the AI bubble about to pop?
It's been a great few weeks for OpenAI. The world's most valuable startup recently announced ChatGPT will become more like an operating systempublished it first social networking appand even spread rumors about the launch of a developed device to make us happy.
Of course, there are some tricky accounting tasks along the way. These big product announcements came after chipmaker Nvidia, the world's most valuable company, invested $100 billion in OpenAI to build more data centers that OpenAI will fill with Nvidia chips. Then OpenAI made a deal with AMDNvidia's rival to build even more data centers and then fill them with AMD chips. Some analysts call these types of deals “circular“, as a company invests money in another company, which gives some of it directly back. Others call it “bubble-like behavior.”
All in all, OpenAI has colored Computer deals worth $1 trillion this year alone. With this incredible amount of money, you can do things like buy houses on Zillow without leaving ChatGPT, star in your own AI-generated sitcom, and carry everything around with you an artificially intelligent surveillance device in your pocket. A trillion dollars is also a very silly sum considering that OpenAI has never made a profit and is reportedly expecting losses triple to $14 billion in 2026. And yet OpenAI's value rose to $500 billion last week. (Disclosure: Vox Media is one of several publishers that have signed partnership agreements with OpenAI. Our reporting remains editorially independent.)
Math like this is what has more and more people talking about the AI bubble and its impending burst. On Wednesday, the Bank of England precautionary measuresd that the risk of a “sudden correction” in global markets increases as valuations of leading AI companies increase. On the same day, IMF Managing Director Kristalina Georgieva issued a similar warning and said technology company valuations are “heading toward the levels we saw during the Internet bull run 25 years ago.” The Nasdaq index peaked on March 10, 2000 before imploding. The Nasdaq closed at an all-time high on October 6th.
Bubble-like behavior, briefly explained
The idea that we're looking at another The tech bubble is not new. It's been around for at least a decade, and even before ChatGPT stunned the world with its popularity, people were wrestling with the AI hype. But now the stakes are higher than ever as investment in the AI industry has spread to all sectors of the economy. The AI boom is no longer just a Silicon Valley company, as the real estate, construction and even air conditioning industries rely on the real estate, construction and even air conditioning industries to build the data centers needed to run apps like ChatGPT. And then there is the chip industry, which ultimately is it relies on a single company in Taiwan to produce the most advanced semiconductors for AI. Everyone seems to think the AI bet is too big to pass up.
The AI hype is so powerful, this is it to stimulate the rest of the economy. It is too masking a lot of bad economic news in the United States, including inflation, stagnant growth, and a terrible job market for young people, to which the rise of AI has likely contributed. If the AI boom actually developed into an AI bubble and that bubble burst, the shock wave would affect everything.
That's a scary thought. It's also increasingly looking like a very real possibility. Circular dealmaking is just a warning sign and does not only affect OpenAI. Elon Musk's xAI recently raised $20 billion, some of which came from Nvidia. to buy Nvidia chips.
Another warning sign is the simple fact that We don't know if these big bets on AI will pay off. AI companies expect demand for their products to continue to grow, which is why they are investing so much in infrastructure to meet that demand if necessary. But everything is speculative. The hundreds of billions of dollars being poured into data centers is reminiscent of the huge investments in Internet infrastructure in the 1990s. Ultimately, however, the supply of fiber optic cables exceeded demand The telecommunications industry collapsed.
However, the most noticeable signs of danger are what you have probably experienced yourself: the bad mood. Americans in general are Pessimistic about AI and have only become more concerned about the technology since the introduction of ChatGPT. We don't really know how AI will improve our lives. Sure, ChatGPT is popular – OpenAI says it is 700 million weekly active users – but it's far from clear whether it will be our new operating system or the new front door to the Internet. The ability of AI to increase productivity is also as yet unproven. An MIT study released last month found that 95 percent of organizations surveyed No return found from their AI initiatives.
It's entirely possible that the AI boom is here to stay and we'll all ride into the future with virtual assistants in our ears and data centers in our backyards. It's also possible that the bubble mongers are right and that not only will we relive the dot-com crash of the early 2000s, but also the consequences of the railway craze in the 1840s. In both periods, businesses collapsed and lives were ruined. However, the infrastructure remained intact. After all, Victorian England had a railway system, and Silicon Valley had subways that ran the Internet. Finally we figured out how to make it all work.
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