The AI bubble is here with $1 trillion in losses already

As economists speculated whether the stock market was in an AI bubble that could soon burst, OpenAI CEO Sam Altman admitted to believing we’re in one. “Are we in a phase where investors as a whole are overexcited about AI?” Altman said in an interview with The Verge 10 days ago: “My opinion is yes.”

“When bubbles happen, smart people get overexcited about a kernel of truth,” The Verge said on Altman’s comments, which included an admission by the OpenAI CEO that his company “totally screwed up” ChatGPT. 

Cognitive scientist and AI researcher Gary Marcus attributes the wobble in markets to GPT-5 above all. It’s not a failure, he said, but it’s “underwhelming,” a “disappointment,” and that’s “really woken a lot of people up.” Marcus said, “GPT-5 was sold, basically, as AGI (human-level intelligence), and it just isn’t. It’s not a terrible model, it’s not like it’s bad, but it’s not the quantum leap that a lot of people were led to expect.” Then came the sweeping MIT survey that put a number on what so many people seemed to be feeling: a whopping 95 per cent of generative AI pilots at companies are failing. What happened next? A tech sell-off ensued, fuelled by concerns that big investments in AI are not paying off, as investors panicked, sending the value of the S&P 500 down by $1 trillion, according to a Fortune report on August 24.

Mark Zuckerberg halts AI hiring

Without hesitation and also fearing an AI bubble, Mark Zuckerberg has blocked the recruitment of artificial intelligence staff at Meta, slamming the brakes on a multibillion-dollar hiring spree.

ChatGPT came out in November 2022 with little fanfare but quickly became the fastest-growing tech product in history. The chatbot’s remarkable ability to mimic human communication and problem-solve sparked hope of finally building machines as clever as humans.

However, Altman accepts his company flopped with the latest release by failing to realise how the model’s change in tone would affect consumers. He noted that more customisation will be coming to ChatGPT in the near future.

“There will have to be a very different kind of product offering to accommodate the extremely wide diversity of use cases and people,” he said.

Plans to spend trillions of dollars

Altman said OpenAI will likely spend trillions of dollars on data centres alone in the “not very distant future. And you should expect a bunch of economists to wring their hands and be like, ‘Oh, this is so crazy, it’s so reckless’ … And we’ll just be like, ‘You know what? Let us do our thing.’”

Asked where he plans to find those trillions of dollars, Altman hedged. “I suspect we can design a very interesting new kind of financial instrument for financing computing that the world has not yet figured out,” he said. “We’re working on it.” At the same time, Altman said that he expects some significant AI investments not to pan out, just as some companies’ investors lost out when internet infrastructure was being built out during the dotcom boom. “Someone is going to lose a phenomenal amount of money, we don’t know who, and a lot of people are going to make a phenomenal amount of money,” he said. “And my personal belief, although I may turn out to be wrong, is that on the whole, this will be a huge net win for the economy.”