Google’s CEO: The Fate of All Firms if the AI Bubble Bursts

The AI industry has witnessed huge investment flows in recent months – with valuations climbing to levels that have prompted comparisons to the dotcom boom of the late 1990s. 

Now, a head of one of the sector’s largest players has issued a warning that no company will be spared if the bubble bursts.

Sundar Pichai, CEO of Alphabet – the parent company of Google – says even his firm would not escape the fallout from any market correction despite its scale and resources. 

Speaking to BBC News at Google’s California headquarters, he acknowledges the current moment as “extraordinary” but notes elements of “irrationality” have crept into what he describes as an otherwise rational boom.

“I think no company is going to be immune, including us,” he says when asked whether Google could weather a potential downturn.

Inside Alphabet’s AI chips developed to rival Nvidia

The admission is striking given Alphabet’s current position. 

The company’s market capitalisation now sits at US$3.5tn after its share price doubled in just seven months – driven by investor confidence in its ability to fend off the threat from OpenAI, the developer of ChatGPT.

Part of that confidence stems from Alphabet’s push into specialised superchips for AI applications, putting it in direct competition with Nvidia, the semiconductor company.

Led by CEO Jensen Huang, the company recently became the first to reach a US$5tn valuation. 

These chips form the computational backbone of AI systems, processing the vast calculations required to train and run machine learning models.

Yet questions about market sustainability continue to mount. 

Analysts have raised eyebrows at approximately US$1.4tn worth of deals centred on OpenAI, while the company’s revenues this year are expected to represent less than one thousandth of that planned investment figure.

The CEO draws parallels to the internet era, when Federal Reserve Chairman Alan Greenspan warned of “irrational exuberance” in 1996, a full four years before the dotcom crash.

“Given the potential of this technology, the excitement is very rational,” he says.

“It’s also true when we go through these investment cycles, there are moments we overshoot collectively as an industry.

“We can look back at the internet right now. There was clearly a lot of excess investment, but none of us would question whether the internet was profound or did it drive a lot of impact. 

“It’s fundamentally changed how we work digitally as a society. 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.”

Jamie Dimon, CEO of US investment bank JP Morgan, echoed similar concerns last month, telling the BBC that while AI investment would pay off, some of the money poured into the industry would “probably be lost”.

Why Google commits billions to the UK’s AI expansion

Sundar Pichai argues Alphabet’s integrated approach offers some buffer against turbulence.

The company controls what he terms a “full stack” of technologies, spanning chip design, data resources including video platform YouTube, AI models and research capabilities through its DeepMind division based in London.

That UK presence is set to expand substantially. 

Alphabet announced in September it would invest £5bn (US$6.58bn) in British AI infrastructure and research over two years, with the CEO revealing the company will develop “state of the art” research work in the country. 

He says Google will “over time” train AI models in the UK, a process that involves using large datasets to develop the pattern recognition systems that power AI applications. 

UK ministers view such commitments as cementing the country’s position as the third largest AI centre after the United States and China.

“We are committed to investing in the UK in a pretty significant way,” the CEO says.

The energy issue

The energy requirements present another challenge. 

AI accounted for 1.5% of global electricity consumption last year, according to the International Energy Agency (IEA) and those demands show no sign of slowing. 

Sundar Pichai describes the needs as “immense” and warns that action is needed to develop new energy sources and scale up infrastructure.

“You don’t want to constrain an economy based on energy and I think that will have consequences,” he says.

The energy demands have already affected Alphabet’s climate commitments. 

While the company maintains its target of reaching net zero emissions by 2030, the CEO acknowledges there will be slippage, saying: “The rate at which we were hoping to make progress will be impacted.”

On employment, he describes AI as “the most profound technology” humankind has worked on, one that will force society to “work through societal disruptions” while creating new opportunities.

“It will evolve and transition certain jobs and people will need to adapt,” he says, adding that those who embrace the technology “will do better”.

“It doesn’t matter whether you want to be a teacher [or] a doctor. All those professions will be around, but the people who will do well in each of those professions are people who learn how to use these tools.”