Silicon Valley's Growing Concern Over Potential AI Bubble

Sat Oct 11 2025 14:51:40 GMT+0300 (Eastern European Summer Time)

Amidst soaring valuations and unprecedented investments, experts in Silicon Valley express growing fears regarding a potential AI bubble. OpenAI's Sam Altman acknowledges concerns while others warn of far-reaching economic impacts when the bubble bursts.

In recent discussions among AI leaders, including OpenAI's Sam Altman, concerns regarding a potential AI bubble have intensified. Critics point to inflated company valuations driven by rapid investment, warning of a downturn that could affect the broader economy. As Silicon Valley navigates these uncertain waters, discussions surrounding the sustainability and profitability of AI ventures are paramount.

At OpenAI's DevDay this week, OpenAI boss Sam Altman did what American tech bosses rarely do these days: he actually answered questions from reporters.

I know it's tempting to write the bubble story, Mr. Altman told me as he sat flanked by his top lieutenants. In fact, there are many parts of AI that I think are kind of bubbly right now. In Silicon Valley, the debate over whether AI companies are overvalued has taken on a new urgency. Sceptics are privately - and some now publicly - asking whether the rapid rise in the value of AI tech companies may be, at least in part, the result of what they call financial engineering. In other words - there are fears these companies are overvalued.

Mr. Altman said he expected investors would make some bad calls and silly start-ups would walk away with crazy money. But with OpenAI, he told me, there's something real happening here. Not everyone is convinced. In recent days, warnings of an AI bubble have come from the Bank of England, the International Monetary Fund, as well as JP Morgan boss Jamie Dimon who told the BBC the level of uncertainty should be higher in most people's minds. And here, in what is often considered the tech capital of the world, concerns are growing.

At a panel discussion at Silicon Valley's Computer History Museum this week, early AI entrepreneur Jerry Kaplan told a packed audience he has lived through four bubbles. He's especially concerned now given the magnitude of money on the table as compared to the dot-com boom. There's so much more to lose. When [the bubble] breaks, it's going to be really bad, and not just for people in AI, he said. It's going to drag down the rest of the economy. However, at the Stanford Graduate School of Business, which has minted its fair share of tech entrepreneurs, Prof Anat Admati says while there have been many attempts to model when we're in the bubble, it can be a futile exercise.

Mr. Kaplan says he sees a couple of telltale signs the AI sector - and therefore the wider economy - could be in trouble. In frothy times, he says, companies announce major initiatives and product plans that they don't yet have the capital for. Meanwhile, retail investors clamour to get in on the start-up action. The surge in AMD stock this week could indicate investors are trying to get a piece of the ChatGPT wealth machine - and while all this is playing out, real physical infrastructure aimed at satisfying the seemingly insatiable hunger for more AI development is being built.

Even if we are in a bubble, the hope from Silicon Valley is investments being made now won't necessarily go to waste. If there is overinvestment into infrastructure for AI workloads, there may be financial risks tied to it, said Jeff Boudier, who builds products at the AI community hub Hugging Face. But it's going to enable lots of great new products and experiences including ones we're not thinking about today. The question remains whether the money to fund the ambitions of the foremost companies in the sector may be drying up.