Google CEO Admits ‘Elements of Irrationality’ Have Led to an AI Bubble

Worries over an AI bubble are mounting.

A growing list of experts, from the Bank of England to investor Michael Burry of ‘The Big Short’ fame, have indicated belief in an overvaluation of AI stocks to varying degrees.

Over the past few months, tech executives leading companies with record valuations thanks to the AI hype have also joined their ranks. Sam Altman said in August that he thinks investors are currently “over-excited†about AI. Just last month, Bezos called AI an “industrial bubble.â€

The latest name to add to that list is Google CEO Sundar Pichai.

“Given the potential of this technology, the excitement is very rational. It’s also true, when we go through these investment cycles, there are moments we overshoot collectively as an industry,†Pichai told the BBC in an interview published on Tuesday. “So, I think its both rational and there are elements of irrationality in moments like these.â€

The Google chief essentially likened the current AI trade to the dot-com bubble, which wiped out around $5 trillion in market value when it burst.

“We can look back at the internet right now, there was clearly a lot of excess investment but none of us would question whether the internet was profound or that it drives a lot of impact, it fundamentally changed how we work digitally as a society,†Pichai said. “I expect AI to be the same.â€

What’s been worrying AI enthusiasts more than the spectre of a bubble ballooning is one bursting.

Those worries were raised by some after Meta downsized its AI department last month, following a massive hiring spree over the summer. And then again this past week, when both SoftBank and Peter Thiel’s hedge fund Thiel Macro reportedly dumped their stakes in AI darling Nvidia, which is reporting a much anticipated earnings report on Wednesday afternoon.

When asked what would happen if this hypothetical AI bubble burst, Pichai said that “no company is going to be immune.†That includes Google themselves, even though Pichai said he thinks they are “better positioned.â€

Google is one of several companies that have made big bucks on AI hype. Google-parent Alphabet became the fourth company to pass $3 trillion market cap in September. Meanwhile it continues to pour billions into scaling its AI offerings, including the company’s top AI product Gemini.

It’s not just Google that’s shelling out a fortune. Tech giants across the industry are spending exorbitant amounts of money on AI.

Pichai told the BBC that the tech industry overall has “well over a trillion dollars of investment†dedicated to building AI infrastructure, a number that is only exponentially increasing with no end in sight.

Deutsche Bank said in September that current AI spend is so massive that it could be propping up the entire American economy right now.

Meanwhile, an MIT report from August claims that only 5% of businesses that have adopted AI were generating real revenue gains.

Nevertheless, Pichai believes AI is still the future of society. In the BBC interview, he had some advice to share on how to navigate this AI-integrated future he and the rest of Silicon Valley are envisioning.

Pichai said that people had to “adapt†as he predicted that widespread adoption of AI will cause certain jobs to “evolve and transition.†To do so, he claimed, everyone in every occupation should embrace using AI in their work. But just moments after this endorsement of AI-integrated work, he admitted that the technology is prone to errors, unlike the company’s other products, like Google Search, which are “more grounded in providing accurate information.â€