At OpenAI’s DevDay in San Francisco, CEO Sam Altman did something few American tech executives do these days, he answered tough questions from journalists.
“I know it’s tempting to write the bubble story,” Altman said, flanked by his senior team. “And in fact, there are many parts of AI that are kind of bubbly right now.”
His remarks come at a time when debate is intensifying in Silicon Valley over whether the artificial intelligence boom is overheating. Investors, analysts, and even central banks are asking whether AI valuations reflect genuine progress or simply clever financial maneuvering.
Warning Signs of an AI Bubble
Concerns about inflated AI valuations are spreading beyond the tech industry. The Bank of England, the International Monetary Fund, and JPMorgan Chase CEO Jamie Dimon have all warned of rising financial risks. Dimon told the BBC that “uncertainty should be higher in most people’s minds.”
At a panel discussion at Silicon Valley’s Computer History Museum, early AI pioneer Jerry Kaplan said he has lived through four market bubbles and fears this one could be the most damaging. “When this bubble breaks, it’s going to be really bad, and not just for people in AI,” he said. “It’s going to drag down the rest of the economy.”
At Stanford University, finance professor Anat Admati added that while economists have long tried to predict bubbles, “you can’t say with certainty until after it happens.”
Billions Flowing Into AI
AI investments have powered 80 percent of U.S. stock market gains this year. Research firm Gartner estimates that global AI spending could reach $1.5 trillion by the end of 2025.
At the center of the frenzy sits OpenAI, the company that brought artificial intelligence into the consumer mainstream with ChatGPT. It has announced a string of massive partnerships in recent months, including a $100 billion collaboration with chipmaker Nvidia to build AI data centers, a multibillion-dollar deal with AMD for equipment, and a $300 billion partnership with Oracle to develop its “Stargate” data project in Texas.
Microsoft, one of OpenAI’s biggest investors, remains deeply tied to its success, while Nvidia also holds a stake in CoreWeave, a startup that supplies OpenAI’s cloud infrastructure.
Critics say such interconnected investments risk creating “circular financing,” where companies fund one another to inflate valuations and demand. “Yes, the investment loans are unprecedented,” Altman said. “But it’s also unprecedented for companies to be growing revenue this fast.”
Fragile Foundations
Despite rapid growth, OpenAI has yet to turn a profit. Analysts note the similarities with Nortel, the telecom giant that fueled its expansion through customer loans before collapsing in the early 2000s.
Nvidia CEO Jensen Huang defended his company’s partnership with OpenAI, saying there were no restrictions on how the funds could be used. “Our goal is simply to support them and help grow the ecosystem,” he said.
Echoes of the Dot-Com Era
Veteran entrepreneurs say several signs point to overheating. Companies are announcing projects they cannot yet fund, retail investors are chasing hype, and firms are pouring billions into massive data centers to meet the demand for computing power.
Kaplan warned that the rush could also carry environmental risks. “We’re creating a man-made ecological disaster,” he said, referring to huge server farms being built in remote areas that may one day sit abandoned.
Still, some industry insiders argue that even if a bubble bursts, the investments being made today will not go to waste. “The internet was built on the ashes of the telecom bubble,” said Jeff Boudier of AI platform Hugging Face. “If AI infrastructure is overbuilt, the financial risks are real, but it could also enable innovations we can’t yet imagine.”
The question now is whether the flow of money into artificial intelligence can continue. As one investor put it, “Nvidia looks like the last lender standing. Who else can pour $100 billion into another company right now?”
