Stock markets tumble as Google boss warns ‘no company is going to be immune’ if AI bubble bursts
The boss of Google parent Alphabet has warned that no company will be immune if the artificial intelligence (AI) bubble bursts.
Sundar Pichai told the BBC that although the level of investment in artificial intelligence was an “extraordinary moment”, there was some “irrationality” in the ongoing boom.
When asked whether Google would be immune to the impact of the AI bubble bursting, Pichai said the business could weather the potential storm, but offered a caveat.
He said: ‘I don’t think any company, including us, will be immune from this situation.’
The warning comes after share markets fell once again in early trading on Tuesday, with the FTSE 100 falling 115 points, or 1.2 per cent.
The blue-chip index has fallen more than 300 points, or over 3 percent, in the last four sessions since reaching an all-time high of 9900 on Wednesday last week.
The wave of sales that echoed around the world increased fears that the bubble was about to burst.
Victoria Scholar, head of investment at Interactive Investors, said there was a ‘sea of red’ in the stock markets, with Bitcoin also taking a hit and losing all its gains so far this year.
“Fear of an AI bubble and concerns about the market’s heavy dependence on a handful of tech giants have caused investors to reduce their interest in speculative assets such as Bitcoin,” Scholar said.
‘There has been a general uneasiness affecting the general mood of the market lately and Bitcoin appears to be in the firing line.’
The debate in Silicon Valley over whether artificial intelligence companies are overvalued has taken on new urgency in recent weeks.
Investors are increasingly unsettled by warning signs that the rally in AI stocks, which has sent U.S. markets to a series of highs, may be exaggerated.
Warning: Sundar Pichai, boss of Google parent company Alphabet, says there is some ‘irrationality’ in the current AI boom
Pichai said the technology sector can overshoot the target in such investment cycles.
He added: ‘We can look online now. There was clearly a lot of investment, but none of us questioned whether the internet was deep.
‘I expect artificial intelligence to be the same. So I think there are both logical and counterintuitive elements of a moment like this.’
The International Monetary Fund and the Bank of England have warned about the risk of an AI bubble in recent weeks.
The value of Alphabet shares has more than doubled in the past seven months to $3.5 trillion, or £2.7 trillion, as markets grow more confident in the firm’s ability to fend off the threat from ChatGPT owner OpenAI.
A particular focus for Alphabet is its development of specialized superchips for artificial intelligence, competing with Nvidia, run by Jensen Huang, which recently reached a $5 trillion valuation.
Big valuation: Nvidia, led by Jensen Huang, recently reached a $5 trillion valuation
As valuations soar, some analysts have expressed skepticism about the complex web of major deals being made around OpenAI, which is expected to generate less than a thousandth of its planned investment this year.
This week, it was revealed that tech billionaire Peter Thiel sold his entire stake in chip maker Nvidia, worth an estimated $100 million or £76 million.
Recently Softbank divested its £4.4bn holdings in Nvidia. The firm’s finance chief Yoshimitsu Goto said: ‘I can’t say whether we are in an AI bubble.’
In October, OpenAI boss Sam Altman said he expected investors to make some bad decisions and some subpar AI start-ups to walk away with stupid amounts of money.
Last month, the boss of US banking giant JP Morgan told the BBC that he believed that the high investment in the artificial intelligence sector would pay off, but that some of the money flowing into the sector would ‘probably be lost’.
Jamie Dimon, boss of US bank JP Morgan, told the BBC last month that investment in artificial intelligence would pay off but some of the money poured into the sector would ‘probably be lost’.
Pichai told the BBC that Google’s model of owning its own ‘whole technology stack’, from chips to YouTube data to models and leading-edge science, means it is better placed to weather any turmoil in the AI market.
Amid fears of the AI bubble bursting, Bitcoin has seen its gains this year erased.
The value of the world’s most popular cryptocurrency has fallen from an all-time high of $126,000 just six weeks ago to below $93,000.
Nigel Green, CEO of deVere Group, said the next few weeks will determine the course of artificial intelligence in 2026.
Green said: ‘AI has been the engine of global markets for two years, but a phase of unbridled optimism is giving way to a sharper focus on resilience.’
He added: ‘Investors are evaluating the strategy in real time.
‘They reward companies that take control over investment and show that adopting AI increases margins. The market becomes much less forgiving when spending exceeds revenue potential.’
Richard Hunter, head of markets at Interactive Investor, told the Daily Mail: ‘Comments from Pichai reflect the quandary investors are currently grappling with, leading to wider market weakness.
‘Fears of overextended valuations and the wisdom of the hundreds of billions of dollars currently invested in AI have led to concerns generally about the timeframe for the return on this spend.
‘Meanwhile, while there are some early signs of adoption, mega-cap tech stocks face a rising bar of expectations, with the closest acid test coming tomorrow in the form of Nvidia results.’
DIY INVESTMENT PLATFORMS
A.J. Bell
A.J. Bell
Easy investment and ready portfolios
Hargreaves Lansdown
Hargreaves Lansdown
Free fund trading and investment ideas
interactive investor
interactive investor
Fixed fee investment from £4.99 per month
free trade
free trade
Investing in Isa is now free on the basic plan
Trade 212
Trade 212
Free share sales and no account fees
Affiliate links: If you publish a product, This is Money may earn a commission. These deals are chosen by our editorial team because we think they’re worth highlighting. This does not affect our editorial independence.
