All or Nothing: The Head of ChatGPT Is About to Pop the AI Bubble
The original (Spanish) version of this article can be found here.
This will be a very short post. I’m on vacation and trying to focus on revising the book I’ll be publishing in February.
But I didn’t want to skip sharing this piece of news, which I find very revealing about what may happen in the coming months.
A few days ago, Sam Altman, the founder of ChatGPT, gave an interview to several media outlets where he was asked the following question:
“Are we in a phase where investors, in general, are overly enthusiastic about AI?”
“In my opinion, yes,” Altman replied. “When bubbles form, smart people get too excited about a kernel of truth. If you look at most bubbles in history, like the tech bubble, there was something real. The technology was really important. The internet was a huge deal. But people got overly excited.”
He was comparing AI to the dot-com bubble that, in the early 2000s, crashed global markets and wiped out hundreds of companies.
Why would the most ardent defender of the technology—the one who has been talking for months about us having reached “the singularity” and about humans being surpassed by computers in the evolutionary chain—try to burst the bubble of his own sector?
In my opinion: because he thinks the only way to save himself is by popping the megabubble that has been created.
ChatGPT is, as of today, the leading company in the AI sector. When companies are not publicly traded, their valuation is based on the price the last investor paid for shares, multiplied by all outstanding shares. ChatGPT is currently seeking investors at a valuation of $500 billion, making it the most valuable privately held company in the world.
But it has a problem. The technology behind “large language models” isn’t proprietary; it can’t be privatized. It’s open knowledge that many other companies also possess. That’s why it faces more and more competitors.
And those competitors are also reaching absurd valuations and raising billions in investments. So much so that some people are sounding the alarm with a very simple explanation: there isn’t enough money in the world to buy all these companies—except through the stock market.
Until recently, a startup was considered a “unicorn” (like Airbnb or Uber) when it surpassed a $1 billion valuation. Today, there are at least 500 AI startups valued at over $1 billion. Can all of these companies successfully go public?
The answer is no.
And if those companies go under, who’s going to pay for the entire data center bubble they’ve built?
“Somebody is going to lose a phenomenal amount of money,” Altman told the media. “We don’t know who, and a lot of people are going to make a phenomenal amount of money. My personal opinion, though I could be wrong, is that overall this will be a great net gain for the economy.”
Altman knows the bubble is going to burst. Everyone knows it at this point. What’s been built around all this isn’t sustainable. And he thinks his chance is to separate himself from the rest so that, when it explodes, he survives. So he’s sending investors a message: “If you want to make money, leave everyone else exposed and come with me.”
Altman is trying to pop the AI bubble himself in order to save himself.
What’s most frightening about all this is the speed at which events are unfolding. OpenAI’s last funding round (ChatGPT’s parent company), where they valued the company at $300 billion and raised $8.3 billion, was just at the beginning of this August. And now they’re announcing another at $500 billion. What’s happening to these companies is that they’re burning through money at the speed of light.
Stay tuned to your screens, because this can’t last much longer.
Update: Updating myself here, because I was slow to see this…
In reality, the only explanation for Altman making these statements is that he’s already running into difficulties raising money for this new round and needs to redirect funding that’s currently going to competitors.
It’s not that he’s going to burst the bubble—it’s that it’s already burst (only, since these companies aren’t publicly traded, we don’t yet see it in the markets).