Is There an A.I. Bubble? And What if It Pops?
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This is Andrew Ross Sorkin, the founder of Dealbook. Every year, I interview some of the world's most influential leaders across politics, culture, and business at the Dealbook Summit, a live event in New York City. On this year's podcast, you'll hear my unfiltered conversations with Gavin Newsom, the CEO of Palantir and Anthropic, and Erica Kirk, the widow of Charlie Kirk. Listen to Dealbook Summit wherever you get your podcasts.
From The New York Times, I'm Natalie Kitro-Eff. This is The Daily. After years of soaring optimism and massive investment in the AI boom, in recent weeks, Wall Street has begun to seriously question whether that optimism was overblown and whether we're actually in a bubble that may soon pop. And yet, despite all that hand-wringing, Silicon Valley has only doubled down, projecting total confidence about the hundreds of billions of dollars it's pouring into the technology. Today, my colleague Cade Metz explains why. Why tech companies believe so fervently in AI. Why they're willing to take huge risks to deliver on its promise. And whether that bet could backfire.
It's Thursday, November 20th. Cade, it seems like the conversation on Wall Street, among investors, in Silicon Valley, even in Washington these days, has gone from whether we're in an AI bubble to the general sense that, yes, we probably are in some sort of a bubble. And yet the companies that you cover from your perch in Silicon Valley, they're continuing to spend huge amounts of cash on this. So explain to us, what is their justification for spending all this money?
Well, three years after the arrival of ChatGPT, the open AI chat bot that really started this AI boom, this is clearly a powerful and in some ways transformative technology. It's used not only to search the Internet in new ways, it can help people do specific tasks in a faster and more efficient way than they did in the past. You see businesses adopting services that can transcribe meetings. You see other applications in health care. There are ways that this technology is already changing the way we live and the way we work. And these companies, and this is classic Silicon Valley, see much bigger transformations on the horizon. These are people, executives, these titans of industry are looking not just at what is possible today, but what they think this technology will do in the future.
And the idea is that that future, it's going to be really expensive to build.
Well, fundamentally, this technology is expensive to build. It's a mind-boggling amount of money, even for people who have spent decades in the tech industry. OpenAI alone has said it's going to spend $500 billion on data centers in the United States alone. to drive these technologies. Let's stop for a second and think about what that means. $500 billion in today's money could fund about 15 Manhattan projects. Wow. It could fund the Apollo program two times over.
The program that sent humans to space, yeah. Exactly.
And that's just the money to drive AI for a single startup, OpenAI. All told, if you look at what is being spent across the globe, not just the U.S., We're talking about nearly $3 trillion. That's an awful lot of money for a technology that is transformative, but is in many ways still speculative, meaning what they see in the future is so big. They, in many cases, believe they're building what is called in the Valley artificial general intelligence, a machine that can do anything the human brain can do.
Can we just pause? I want you to just define this term for me, artificial general intelligence. We hear it a lot. We've talked about it on the show.
What is the current sentiment on the AI market bubble?
It seems kind of hard to get your head around. Like, what does it mean, actually, Cade?
It's shorthand for a machine that can do all of the economically valuable work that people like you and I do on a daily basis. They want to essentially replace all human workers. They want to give the world a technology that can do any job. That, in theory, is worth all this spending. But it's worth saying that we don't know how to get to such a goal.
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