Google boss says trillion-dollar AI investment boom has ‘elements of irrationality’

All companies would be affected if the AI ​​bubble burst, the boss of Alphabet, Google’s parent company, told the BBC.

Speaking exclusively to BBC News, Sundar Pichai said that while the growth of investment in artificial intelligence (AI) had been an “extraordinary moment”, there was a certain “irrationality” to the current AI boom.

It comes amid fears in Silicon Valley and beyond of a bubble, as the value of AI technology companies has soared in recent months and companies spend big on the booming sector.

Asked if Google would be safe from the impact of the bursting AI bubble, Pichai said the tech giant could weather this potential storm, but also issued a warning.

“I don’t think any business will be safe, including us,” he said.

In a wide-ranging exclusive interview at Google’s California headquarters, he also discussed energy needs, slowing climate targets, UK investment, the accuracy of its AI models and the effect of the AI ​​revolution on jobs.

The interview comes as scrutiny over the state of the AI ​​market has never been more intense.

The value of Alphabet shares has doubled in seven months to $3.5 billion (£2.7 billion), as markets have become more confident in the search giant’s ability to fend off the threat from ChatGPT owner OpenAI.

Particular emphasis is being placed on Alphabet’s development of specialized AI superchips that compete with Nvidia, led by Jensen Huang, which recently reached a world-first valuation of $5 trillion.

As valuations rise, some analysts have expressed skepticism about a complex $1.4 billion web of deals being made around OpenAI, which is expected to generate revenue this year of less than a thousandth of the planned investment.

That sparked fears that stock markets were heading for a repeat of the dotcom boom and bust of the late 1990s. That saw the values ​​of early internet companies soar amid a wave of optimism for what was then a new technology, before the bubble burst in the early 2000s and many stock prices collapsed.

This has driven some businesses into bankruptcy, leading to job losses. A fall in stock prices can also affect the value of individuals’ savings, including that of their pension funds.

In comments echoing those of US Federal Reserve Chairman Alan Greenspan in 1996 warning of “irrational exuberance” in the market long before the dot-com crash, Mr Pichai said the industry could “exceed its limits” in investment cycles like this.

“We can look at the Internet right now. There’s clearly been a lot of excess investment, but none of us would question the depth of the Internet,” he said.

“I expect AI to be the same. So I think it’s both rational and there are elements of irrationality in a moment like this.”

His comments follow a warning from Jamie Dimon, the head of US bank JP Morgan, who told the BBC last month that investments in AI would pay off, but that some of the money pumped into the industry would “probably be lost”.

But Mr Pichai said Google’s unique model of owning its own “full stack” of technology – from chips to YouTube data, models and cutting-edge science – meant it was in a better position to weather the turbulence in the AI ​​market.

The tech giant is also expanding its presence in the UK. In September, Alphabet announced it would invest in artificial intelligence in the UK, committing £5 billion to infrastructure and research over the next two years.

Mr Pichai said Alphabet would develop “cutting edge” research in the UK, including at its key AI unit DeepMind, based in London.

For the first time, he said Google would take a step called for by the Government “over time” to “train our models” in the UK – a move which ministers said would cement the UK as the number three AI “superpower” after the US and China.

“We are committed to investing in the UK quite significantly,” Mr Pichai said.

But he also warned of AI’s “immense” energy needs, which accounted for 1.5% of global electricity consumption last year, according to the International Energy Agency.

Mr Pichai said action was needed, including in the UK, to develop new energy sources and expand energy infrastructure.

“You don’t want to constrain an energy-based economy, and I think that will have consequences,” he said.

He also acknowledged that the intensive energy needs of its expanding AI project meant a slippage from the company’s climate goals, but insisted that Alphabet still aimed to reach net zero by 2030 by investing in new energy technologies.

“The pace at which we hoped to progress will be affected,” he said.

AI will also affect work as we know it, Pichai said, calling it “the most profound technology” humanity has worked on.

“We will have to overcome societal upheaval,” he said, adding that this would also create “new opportunities.”

“It’s going to evolve and cause some jobs to evolve, and people will have to adapt,” he said. Those who adapt to AI will “do better.”

“It doesn’t matter if you want to be a teacher [or] a doctor. All of these professions will exist, but the people who succeed in each of these professions will be the ones who learn to use these tools. »