Every company would be hit if the artificial intelligence boom were to reverse, Google-parent Alphabet’s chief executive Sundar Pichai said in an interview with the BBC, as concerns grow about overheated valuations and runaway investment in the sector.
Speaking to BBC News, Pichai said the rapid acceleration of AI investment had been an “extraordinary moment”, but acknowledged that signs of “irrationality” had begun to emerge.
His caution comes amid a broader debate among analysts and policymakers over whether a speculative bubble is forming around AI-linked companies.
Asked about the impact on Google should the AI bubble burst, Pichai said the firm was well placed but not exempt from systemic fallout.
“I think no company is going to be immune, including us,” he said.
Alphabet ramps up AI investment; shares surge
Alphabet has been one of the strongest performers on the stock market this year, climbing nearly 50% as investors reward its AI products and improved profitability in Google Cloud.
Once considered a drag on margins, the cloud division has become a key driver of earnings.
In July, Google announced it would invest $25 billion over the next two years in data centres and AI infrastructure across states linked to the country’s largest electric grid.
The spending is part of a sweeping expansion to strengthen the company’s underlying technology at a time when usage of AI models is surging.
Alphabet has also tapped debt markets to finance its capital programme.
The company sold $17.5 billion in US bonds recently, after issuing €6.5 billion of notes in Europe, joining a wave of technology firms raising funds to support AI development.
Concerns of ‘irrational exuberance’ return
Pichai’s remarks recalled those made by former US Federal Reserve chairman Alan Greenspan in 1996, when he warned of “irrational exuberance” in markets during the lead-up to the dotcom crash.
Pichai said investment cycles often overshoot before stabilising.
“We can look back at the internet,” he said.
“There was clearly a lot of excess investment, but none of us would question whether the internet was profound. I expect AI to be the same. So I think it’s both rational, and there are elements of irrationality through a moment like this.”
His comments follow a warning from JP Morgan chief executive Jamie Dimon, who said that while AI investment would ultimately pay off, some capital would “probably be lost”.
Klarna chief’s ‘nervousness’ about AI investments, and markets’ see-saw
Pichai’s statement came almost in tandem with Klarna chief Sebastian Siemiatkowski’s, who revealed he was “nervous” about the size of investments in AI.
“I think [OpenAI] can be very successful as a company, but at the same time, I’m very nervous about the size of these investments in these data centres. That’s the particular thing that I am concerned about,” he told Financial Times in an interview.
Siemiatkowski holds shares in prominent AI companies, including OpenAI, Perplexity, xAI, and Cerebras, through his family office Flat Capital.
The statements also follow a sell-off in the tech sector the week before last.
Although the market recouped last week, Monday again saw the Nasdaq Composite dropped 0.84% Monday as technology stocks remained under pressure, with Apple, Meta, and Oracle retreating more than 1% each, and Nvidia dropping 2% ahead of its earnings on Wednesday.
Despite the recent pullback in technology stocks amid worries over stretched valuations and rising capital expenditure, some analysts believe markets could still finish the year on a stronger note.
“We continue to see a balance of bullish and bearish signals heading into year-end, but our stance remains that a year-end rally is likely,” Michael Graham, analyst at Canaccord Genuity, wrote in a Monday note.
Analysts say bubble signs exist but remain measured
Earlier this month, Richard Peterson, founder of MarketPsych, said in an interview with Invezz that many conditions for a bubble were present, but the environment remained more disciplined than during the dotcom era.
“In the dotcom days, there were a lot of companies that had ideas but no revenue,” he said.
“Here, you still see venture capitalists putting money into companies without a clear path to profit, but for the most part, it’s been somewhat sober comparatively.”
Peterson said the AI sector was “definitely bubbly”, yet not entirely in a bubble, pointing to stronger fundamentals and wider adoption than previous tech hype cycles.
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