AI hype could end up like the dot-com bubble, veteran investor warns: 'I'd put much larger odds on it coming down'
- Investors are loving AI right now, with chipmaker Nvidia sitting near a $1 trillion market cap.
- But a veteran investor told Bloomberg it "smells very much like the dot-com era."
The AI boom could end up the same way as the dot-com bubble, a veteran ESG investor warned in a recent Bloomberg interview.
"Companies that even mention the word AI in their earnings are seeing boosts to their share price, and that smells very much like the dot-com era," James Penny, the chief investment officer of TAM Asset Management, told Bloomberg.
The dot-com boom in the late '90s happened as investors poured money into companies that prioritized the internet.
Some businesses did very well, like Amazon. Others went bust.
In one week in May, enthusiasm for AI saw a record $8.5 billion invested into tech funds. And new research indicated that the generative AI market could become a $1.3 trillion industry by 2032.
Last month, chipmaker Nvidia reached a $1 trillion market cap thanks to the AI hype, because its graphics processing units are used to process machine learning algorithms.
Its share price had gone up over 170% this year, and analysts are expecting it to continue to soar as it leads the AI arms race.
Basically, there's a lot of money to be made in the AI sector right now. But Penny's suggesting that could all come tumbling down if people aren't careful about overhyping products.
Sam Altman, OpenAI CEO – the company behind ChatGPT – has also cautioned against the recent hype, saying there's "too much of an investor frenzy around AI in the short-term."
"I think the market has got a little bit over its skis," Penny told Bloomberg. "I'd put much larger odds on it coming down from here."
"What generates a recession rips apart the status quo, so one has to be wary of that high growth narrative," he added.