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

If the artificial intelligence bubble bursts, every company will be affected, the head of Google's parent company Alphabet told the BBC.

Speaking exclusively to BBC News, Sundar Pichai said that while the rise in investment in artificial intelligence (AI) was an “extraordinary moment”, there is some “irrationality” about the current AI boom.

It comes amid concerns in Silicon Valley and beyond about a bubble as the value of artificial intelligence technology companies has soared in recent months and companies are spending heavily on the growing industry.

Asked whether Google would be immune to the effects of the AI ​​bubble bursting, Mr Pichai said the tech giant could weather this potential storm but also issued a warning.

“I think no company will be immune, including us,” he said.

In a wide-ranging, exclusive interview at Google's headquarters in California, he also touched on energy needs, slowing climate targets, UK investment, accuracy of its AI modelsand the impact of the artificial intelligence revolution on the workplace.

The interview comes as scrutiny of the state of the artificial intelligence market has never been more intense.

Alphabet shares have doubled in value in seven months to $3.5tn (£2.7tn) as markets grew more confident in the search giant's ability to fend off a threat from ChatGPT owner OpenAI.

Particular attention is being paid to Alphabet's development of specialized artificial intelligence superchips to compete with Jensen Huang's Nvidia, which recently reached a world-first valuation of $5 trillion.

As valuations rise, some analysts are expressing skepticism about the complex web of $1.4 trillion deals surrounding OpenAI, which is expected to generate revenue this year of less than one-thousandth of its planned investment.

That has raised fears that stock markets are preparing for a repeat of the dot-com boom and bust of the late 1990s. This sent the early Internet companies soaring in value on a wave of optimism about what was then new technology, before the bubble burst in early 2000 and many stock prices collapsed.

This led to some companies going bankrupt, resulting in job losses. Falling stock prices could also affect the value of people's savings, including their pension funds.

In comments echoing the words of US Federal Reserve Chairman Alan Greenspan in 1996, who warned of “irrational exuberance” in the market long before the dot-com crash, Mr Pichai said the industry could “leapfrog” such investment cycles.

“We can look back at the Internet right now. Obviously there was a lot of overinvestment, but none of us would doubt that the Internet is deep,” he said.

“I expect AI to be the same. So I think that at such a moment he is both rational and there are elements of irrationality in him.”

His comments follow a warning from Jamie Dimon, chief executive of US bank JP Morgan, who told the BBC last month that investment in AI would pay off, but some money had flowed into the industry. “will probably get lost”.

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

The tech giant is also expanding its presence in the UK. In September, Alphabet announced that investment in UK artificial intelligencecommitting £5 billion to infrastructure and research over the next two years.

Mr Pichai said Alphabet would develop “state-of-the-art” research and development work in the UK, including at its key artificial intelligence unit DeepMind, based in London.

For the first time, he said Google would “over time” take the government-pushed step to “train our models” in the UK – a move that cabinet ministers say will cement the UK as the third “superpower” in artificial intelligence after the US and China.

“We intend to invest quite significantly in the UK,” Mr Pichai said.

However, he also warned of the “huge” energy needs of AI, which amount to 1.5% of global electricity consumption last yearThe International Energy Agency reports this.

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

“You don't want to limit the energy-based economy, and I think that will have consequences,” he said.

He also acknowledged that the intensive energy needs of its expanding artificial intelligence venture have caused it to fall behind the company's climate goals, but insisted that Alphabet still has a goal of achieving net zero by 2030 through investments in new energy technologies.

“This will impact the speed at which we were hoping to make progress,” he said.

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

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

“It will evolve and change some jobs, 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] doctor. All of these professions will exist, but the people who will succeed in each of these professions are the people who will learn to use these tools.”