According to the latest news, Allianz Chief Economic Advisor Mohamed El-Erian, in a speech, discussed artificial intelligence. The AI boom has issued a stark warning: "Investors should be prepared for significant personal losses in the AI sector." - Goldman Sachs Morgan Stanley Earlier warnings also indicated a potential correction in the US stock market as valuations of major AI technology companies reached record highs. Furthermore, a growing number of business executives expressed concern about an "AI bubble."
According to data compiled by media outlets, foreign investors have withdrawn nearly $4.6 billion from the South Korean stock market so far this month, making it one of the worst-hit markets in the region. Data from the Japan Exchange Group shows that as of November 7, foreign investors had net sold $2.3 billion worth of Japanese domestic stocks. This indicates that foreign enthusiasm for Asian AI concept stocks is waning. Growing concerns about high valuations, coupled with weakening market expectations for a December rate cut by the Federal Reserve, have also dampened global risk appetite.
A stern warning
In his latest speech, Mohamed El-Erian issued a stern warning about the AI craze.
He pointed out that investors should prepare for significant personal losses in the AI sector. He also predicted a large number of "credit accidents."
El-Erian stated that he had collaborated with Nobel laureate economist Mike Spence to assess the AI boom and concluded that the market was experiencing a “rational bubble”: while the total value created by AI is enormous, and it is reasonable for investors to take risky investment strategies and “overinvest” for high returns, there is also a dark side behind the bubble: there will be tears and losses.
He pointed out that some characteristics of this bubble are strikingly similar to those of past speculative periods, such as the dot-com bubble, when some companies labeled their businesses to attract capital; now, that label has become " artificial intelligence ." Further fueling the bubble is the fact that some "foundational companies" have also attracted substantial investment, but "not all companies will succeed."
El-Erian believes a key issue is the insufficient emphasis placed on the widespread adoption of AI—specifically, how to comprehensively and systematically introduce AI into the workplace. Unlike countries like China and the UAE, the US currently lacks a comprehensive adoption policy. He adds that if adoption is not handled properly, AI's full potential will not be realized.
Regarding corporate adoption, El-Erian pointed out his concerns about the mainstream corporate mindset that currently views AI primarily as a "cost-minimizing tool." He believes that AI's true potential lies in improving labor efficiency and acting as a "productivity driver." If the US handles the adoption issue correctly, the resulting significant productivity gains could allow for a looser monetary policy than previously thought.
Recently, the market has been considering the view that too much capital has poured into the AI craze, leading to uncertainty about revenue and actual profit prospects, and thus casting doubt on high valuations.
In fact, so far, most of the warnings about overvaluation have come from investors and financial leaders. Goldman Sachs CEO David Solomon and Morgan Stanley CEO Ted Pick have warned that a correction is possible as some major technology companies' valuations reach all-time highs.
Concerns about an "AI bubble"
It is worth noting that a growing number of corporate executives are also expressing concerns about an "AI bubble".
At the Web Summit technology conference in Lisbon, Jarek Kutylowski, CEO of the German AI company DeepL, said: "I think these assessments are exaggerated in some places, and there are signs that a bubble is about to appear."
Picsart CEO Hovhannes Avoyan aptly pointed out: "We see many AI companies with very high valuations even without any revenue."
Furthermore, the market has expressed concerns about the massive capital expenditures in the AI field. A recent report from venture capital firm Accel indicates that by 2030, the number of newly built AI data centers is expected to reach [a certain figure]. The capacity will reach 117 gigawatts, which means approximately $4 trillion in capital expenditure over the next five years.
According to Accel's report, approximately $3.1 trillion in revenue would be needed to offset this capital expenditure.
Since the beginning of this year, Nvidia Giants like OpenAI have announced a series of multi-billion dollar deals aimed at developing data center capacity around the world to meet growing demand.
Ben Harburg, managing partner at Novo Capital, said the figures for future investments being discussed by large tech companies may be exaggerated.
Ben Harburg said, “We’ve heard some crazy headlines about how much energy is needed and how many chips are needed. But I think it’s probably more of a bubble inflating than the front end, the actual product front end.”
Even OpenAI co-founder and CEO Sam Altman admitted, "I think we're starting to realize that data centers may be over-prosperous."
Despite concerns about an "AI bubble," the tech industry remains optimistic about AI's long-term potential. Lyft CEO David Risher stated that given AI's potential impact, there are reasons to be optimistic, but he also acknowledged the risks.
David Risher stated, "Let's be clear, we are absolutely in a financial bubble. Because this is an incredible, revolutionary technology. Nobody wants to be left behind."
The tech company CEOs also discussed their outlook on enterprise demand for AI in 2026. Kutylowski stated that there is currently a lot of demand and interest, with a large number of companies "striving to adopt" AI.
(Source: Securities Times)
