Dan Ives, the Managing Director and Senior Equity Research Analyst at Wedbush, downplayed the AI bubble, pointing out that AI infrastructure demand had grown by 30% to 40% in July. However, OpenAI CEO Sam Altman still thinks some investors will likely get very burnt, which he says will suck.
The OpenAI boss cautioned that startups raising hundreds of millions of dollars with only pitch decks made valuations insane. Capital was frantically chasing a “kernel of truth.” However, Altman stressed that while he did not want to minimize the impact of the AI bubble, he believes AI will create tremendous value for society. The OpenAI CEO said AI will eventually outweigh the froth, and his company was committed to spending more in pursuit of AI’s long-term societal upside.
Altman repeated the word “bubble” almost three times in a span of 15 seconds before joking that “someone’s gonna write some sensational headline” about it. He half-jokingly wished they would not, but said he was okay with it. According to a Cryptopolitan report, Altman said his company was set to spend trillions of dollars to construct more data centers soon. However, the CEO humorously said he expected economists to claim OpenAI was reckless and crazy to think of doing that now.
Altman says investors are overexcited about AI
The OpenAI executive stressed that the industry was at a stage where investors were generally overexcited about AI. He opined that AI was the most important thing recently happening to society. OpenAI also said it was already looking past the cloud capacity of Microsoft’s Azure and actively shopping around for options.
Joseph Tsai, the co-founder of Alibaba, was also worried that the AI sector had a bubble brewing in the United States. He was surprised by the scale at which AI companies were spending on data centers and questioned whether it was necessary to spend those many billions. Tsai especially expressed concern over companies that invested in data center construction without confirming if there was clear demand.
However, Altman bets that OpenAI’s demand will continue rising, its training needs will continue growing, and its expenditures will be more aggressive than other AI companies. He added that his company had a very deep belief in the progress it was witnessing and anticipating in the industry. However, he acknowledged that his company screwed up the GPT-5 launch.
“You should expect us to take as much compute as we can … and we will spend maybe more aggressively than any company who’s ever spent on anything ahead of progress.”
–Sam Altman, CEO at OpenAI
All the megacaps reportedly raised their capital expenditures to keep up with OpenAI. Microsoft is targeting roughly $120 billion in annual capex, Amazon is looking at $100 billion, Alphabet increased its forecast to $85 billion, and Meta extended its capex to $72 billion. However, Ives believes the industry is only in the “second inning of a nine-inning game.”
Rowe pushes back on AI and dotcom bubble comparison
Robert Rowe, Citi’s U.S. Regional Director of Research, disagreed with comparing the AI and dotcom bubbles. He pointed out that the dotcom bubble came when many situations were over-leveraged. Rowe added that few companies had earnings back then, but now they do, with very strong funding and cash flow. He stressed that these companies were funding their growth largely with this cash flow. Rowe also said the AI bubble was unlike the 90s dotcom cycle because companies now did not rely on debt to fund infrastructure spending.
According to the Citi executive, the current AI investment wave was entirely driven by the global economy’s structural shifts. He particularly pointed out the accelerated growth of digital services, which he said now accounted for a big chunk of global exports. Rowe also believes that AI spending will soon match the contribution of private consumption to GDP growth.
However, Altman believes these cycles are part of technology’s natural progress rhythm. The OpenAI boss expects the AI bubble to follow the same trend as the dotcom bubble: lasting transformation after a few high-profile wipeouts.
