Sundar Pichai, Google and Ruchir Sharma, investment-writer have expressed reservations about the AI hype that could lead to an AI bubble. There is a distinction between the rea l transformational nature of AI and the market euphoria that surrounds it. Google’s reservations are relevant since it is from a company whose rise coincides with the progress of AI. Google does not foresee the collapse of AI but expects us to have realistic expectations. AI has to be integrated into business and society. Ruchir Sharma is concerned about the rising stock prices of tech firms not justified by their earnings. VCs rushing to fund the startups’ AI layer reminds us of the bubbles in the past.
It is true AI has the potential to change the world but that does not make every AI company worthy of sky-high valuation. There are triple-digit price-to-sales ratios, optimistic revenue projections, and business models which rely on subsidised computations. There is heavy capital expenditure commitment.
AI firms are treated as high-growth software firms. The cost structures resemble those of public utilities. There are heavy infrastructure investments (cloud providers, GPU investment). It is to be seen how fast these investments could be monetized. Can there be as fast AI adoption? AI could be a low-margin commodity rather than a growth engine. This does not mean AI story is illusory. It only means that the hype cycle must be separated from the underlying value. Policy makers and businesses can avail of the AI Opportunity, but they must prevent the unnecessary hype not supported by fundamentals.
There should be balance between ambition and pragmatism. AI investments must be prudent. The expectations are to be managed in the midst of a dynamic innovative environment. AI’s lasting impact does not depend on short term market excitement. AI has to be integrated to social and economic systems. The integration must generate real value. A transformative technology should not be overshadowed by a financial bubble.
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