One of the top minds behind billionaire Peter Thiel’s investment firm says the artificial intelligence (AI) sector is in one of the biggest bubbles of all time.
In a new interview with Bloomberg Television, Jack Selby, managing director at Thiel Capital, says at some point, the optimism around AI will end in a bloodbath that destroys hundreds of billions of dollars.
“The euphoria that’s going on in coastal VC, especially around AI, I think, arguably it would be the biggest bubble that we’ve ever seen in private tech investing in modern times. So, as an example, OpenAI had to revise their cost estimates upwards by 250%.
So a rounding error, so to speak, of only $80 billion. It just seems insane to me because if this had been a publicly traded company, the stock would’ve have sold off by 90%. But instead, there’s just these breathless storytelling narratives around how all the AI trees are growing to the sky, and I think when the dust settles, whenever this bubble pops, there’s going to be tens if not hundreds of billions of dollars that will literally be incinerated.”
Selby notes that there were many companies from the Dotcom bubble that no one remembers, such as search engines Lycos and AltaVista, because they were ultimately swallowed up by the larger companies.
The investor says he’s looking for the same story to repeat over the next five years.
“Most people won’t remember Lycos and AltaVista because they went bust, and so one of the questions to potentially ask yourself is: What will be the Lycos and AltaVista equivalents for today’s AI breathless environment?
Because there will be many, and I think there will be companies, when the dust settles, will survive and do well, and I’m sure OpenAI has a good chance of being one of those companies and many of the other prominent companies as well. But at the same time, there will be many, many other companies that will just not survive, and those companies will incinerate billions and billions of dollars in capital and LPs capital and the various venture funds that invested in these companies. And that shakeout will be massive.”
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