Fri, 10 Oct 2025

Fri, 10 Oct 2025 'It's going to be really bad': Fears over AI bubble bursting grow in Silicon Valley

Some are worried that the rapid rise in the value of AI tech companies may be a bubble waiting to burst.
Concerns are growing over the valuation and potential bubble in AI tech companies, including OpenAI, after its boss Sam Altman acknowledged that some areas of the industry may be overvalued. The CEO stated that he expects investors to make mistakes and for some startups to receive excessive funding, but emphasized that there's "something real happening" at OpenAI. The Bank of England, IMF, and JP Morgan have also warned about an AI bubble, with experts predicting a significant impact on the wider economy if it were to burst. Early AI entrepreneur Jerry Kaplan has expressed concern, saying he's seen four bubbles in his career and fears that this one will be particularly severe. OpenAI is at the center of scrutiny due to its $100bn deal with Nvidia and plans to purchase billions of dollars worth of equipment from AMD. The company's valuation is estimated to be half a trillion dollars, despite never turning a profit. Experts are worried about "circular financing" or "vendor financing", where companies invest in or lend to their own customers to boost demand for their products. Mr Altman acknowledged that investment loans are unprecedented but argued that it's also unprecedented for companies to grow revenue this fast. However, some experts see telltale signs of a bubble, including companies announcing major initiatives and product plans without sufficient capital and retail investors clamoring to get in on the action. The surge in AMD stock could indicate investors trying to tap into the ChatGPT wealth machine. Despite concerns about overinvestment, many believe that investments being made now won't necessarily go to waste, as the internet was built on the ashes of previous investment.
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