OpenAI Chairman Bret Taylor Warns of AI Bubble, Drawing Parallels to Dot-Com Era

OpenAI board chair doubles down on CEO Sam Altman's belief we're in an AI bubble: 'A lot of people will lose a lot of money' | Fortune

OpenAI chairman Bret Taylor is not naive to the potentially mammoth consequences of a tech bubble, but he said the prospect isn't without its benefits. The former Facebook CTO and current CEO of AI business platform Sierra shares the opinion of OpenAI CEO Sam Altman that we're in an AI bubble -- but that's not entirely a bad thing. "It is both true that AI will transform the economy, and I think it will, like the internet, create huge amounts of economic value in the future," Taylor said in the most recent episode of The Verge's "Decoder" podcast. "I think we're also in a bubble, and a lot of people will lose a lot of money. I think both are absolutely true at the same time, and there's a lot of historical precedent for both of those things being true at the same time." Altman echoed Taylor's sentiments last month, warning of big winners and big losers from an AI hype cycle. "Someone is going to lose a phenomenal amount of money," Altman said during a dinner for journalists, The Verge reported. "We don't know who. And a lot of people are going to make a phenomenal amount of money." Taylor and Altman join the chorus of industry giants and economists warning about how the astronomical rise of AI has led investors to overhype companies, inflating them beyond their actual worth -- with significant financial consequences. Apollo Global Management chief economist Torsten Sløk warned in July that the top 10 companies in the S&P 500 are more overvalued today than they were during the dotcom era 25 years ago. Alibaba's chair Joseph Tsai and C3.ai CEO Tom Siebel have both warned in the last year that we're entering an AI bubble. The fallout of the dotcom bubble burst in 2000 was weighty: In March, the NASDAQ rose to its peak of 5,048 units, only to plummet to 1,139.90 units in October, a 77% plummet. The downturn, by the time it ended in 2002, had wiped out about $5 trillion in market capitalizations. According to Taylor, it's worth paying attention to the big winners of the dotcom era when drawing conclusions about the impact of a bubble burst and what it would mean for the tech industry. "There's a lot of parallels to the internet bubble," he said. Looking at the successful companies that emerged from the early dotcom era is evidence that just because scores of internet companies were overhyped doesn't mean the hype wasn't justified for others, according to Taylor. The dotcom bust had famous flops such as Pets.com, a pet-supplies retailer that went belly-up prioritizing rapid growth, and Webvan, a grocery-delivery company that filed for bankruptcy in July 2001 -- but it also produced Amazon and Google, which have growth to be some of the world's largest companies, Taylor pointed out. Amazon's share price has grown nearly 15,000% since October 2000, and Google, which was not a publicly traded company in 2000, has similarly grown, reaching a more than $2.9 trillion market cap. Moreover, even failed companies like Webvan made their mark on the tech work, Taylor said, paving the way for companies like Instacart and DoorDash to build upon the retail delivery companies of the turn of the century. "You start to look and you say, 'Actually, if you look at the GDP of the world, how much has actually been created or influenced by the existence of the internet?' One could argue that all the people in 1999 were kind of right," he said. "It was as impactful on pretty much every measure." Taylor indicated there will be winners of the AI boom, but it's difficult to say what these wins will look like. He pointed to fiber companies, many of which went under as a result of the dotcom bust, but not before making their mark on improving the speed of data. Most famously, Global Crossing, which had a value of $55 billion in its heyday, went bankrupt in 2002 after failing to find customers to make it profitable. "Because of the amount of economic opportunity, you just end up with a ton of investors, and some companies will fail and some will succeed," Taylor said. "If you look at the people who built out fiber in the early days of the internet, a lot of them went bankrupt, but that fiber ended up getting used, just by the next person or the private equity firm or whatever entity bought it."

OpenAI Chairman Compares AI To Dot-Com Bubble: 'Some Companies Will Fail And Some Will Succeed' - Amazon.com (NASDAQ:AMZN)

OpenAI Chairman Bret Taylor believes the AI sector may be in a bubble similar to the dot-com era, but that's not deterring him from OpenAI or his other AI startup. What Happened: As AI use cases grow, valuations in the sector have surged. OpenAI is now one of the world's most valuable private companies. In a recent interview with The Verge, Taylor expressed caution about the sector's rising valuations. The Verge also asked Taylor about OpenAI CEO Sam Altman, who said that we're currently in an AI bubble. Taylor agreed. "I think there's a lot of parallels to the internet bubble," Taylor, the former CTO of Meta Platforms, said. Dot-com companies like Pets.com and Webvan were flops and still got attention. But some companies made it out of the bubble, Taylor explained. That includes "two of the largest companies in the world" -- Amazon and Google. The OpenAI chairman noted that examining the growth of GDP reveals how much has been created by the "existence of the internet." "One could argue that all the people in 1999 were kind of right. It was as impactful on pretty much every measure." Taylor gave props to Webvan that may have been early and help pave the way for the success of companies like Instacart and DoorDash today. Taylor said if you were an Amazon.com Inc AMZN shareholder during the dot-com bubble, you're still looking good today. When it comes to the AI sector today and the bubble, Taylor said, "there's going to be huge winners." "Some companies will fail and some will succeed." Taylor said AI can transform the economy and create value for the future, but some companies and investors will lose money. Read Also: OpenAI Chairman Says Only Tech Giants Can Afford New AI Models -- Startups Should Focus On Applications Why Taylor Isn't Worried An AI bubble would be bad news for Taylor, who is also the CEO and founder of Sierra, an AI agent company. And yet, Taylor isn't worried about an AI bubble. Instead, he argues against the notion that companies aren't seeing results from AI spending. "We're just in a really new world because we're taking something scarce and making it plentiful," Taylor said. When it comes to Sierra, Taylor said the company isn't selling AI. Rather, it's "selling customer experience" and has a near 100% success rate with customers doing proof of concept studies before going live. As Taylor sees it, we're in "the early days of AI." Companies are using the tech to either solve problems or build AI solutions themselves, he explains. For example, Sierra is partnering with retailers so consumers can submit a photo of damaged goods as a warranty claim. The new product is then shipped out, all done without a human involved. "These agents are remarkable at what they're doing," Taylor adds. Sierra has hundreds of customers, with more than 50% of the company's customers having annual revenue of more than $1 billion and 20% of the company's customers having yearly revenue of more than $10 billion. Image: Shutterstock AMZNAmazon.com Inc $231.741.57% Stock Score Locked: Want to See it? Benzinga Rankings give you vital metrics on any stock - anytime. Reveal Full Score Edge Rankings Momentum 69.31 Growth 92.42 Quality 61.68 Value 46.04 Price Trend Short Medium Long Overview Market News and Data brought to you by Benzinga APIs