Alphabet’s chief sees ‘irrationality’ in the AI market

Pichai sees 'irrationality' in AI and warns no firm is immune if a bubble bursts.

No company is immune to a potential bursting of the artificial-intelligence bubble, Alphabet chief Sundar Pichai said in an interview with BBC.

He sees signs of “irrationality” in today’s AI frenzy. Pichai likened the moment to the dotcom boom, when the sector was flooded with excess investment. Yet, as with the internet, the fundamental importance of the technology is not in doubt.

Pichai is confident Alphabet can weather any downturn thanks to a “full‑stack” strategy—the company controls everything from chip production to data processing and AI-model development.

He also acknowledged that the high energy demands of AI have slowed progress toward the company’s climate goals. Alphabet had planned to reach carbon neutrality by 2030.

The executive also addressed AI’s impact on the labour market. He called the technology “the most profound” humanity has worked on and warned of coming “social shifts”.

“The technology will change some professions, and people will have to adapt. Specialists who learn to use new tools will be more successful,” he concluded.

Investment in the sector

Amid the boom, investors are piling into AI companies. Analytics firm Databricks is discussing a new funding round that could lift its valuation to $130bn, The Information reports, citing its own sources.

That would be 30% above the $100bn valuation it received two months ago.

In September Databricks raised $1bn. At the time, company representatives said they planned to reach $4bn in annual revenue amid strong demand for AI products.

Founded in 2013, Databricks provides a platform for data analytics and building AI applications. About 15,000 customers use its services, including Block and Shell.

“The Big Short” 2.0

Michael Burry, the investor who predicted the 2008 mortgage crisis, opened short positions against AI giants Nvidia and Palantir worth $1.1bn. He believes a bubble has formed that will soon burst.

Burry’s hedge fund bought put options, betting on a decline in the shares of two key AI players.

Palantir boss Alex Karp called Burry’s wager “complete madness”.

“The two companies he is shorting are the ones that are making all the money, which is very strange. […] Shorting chips and ontology is madness,” he said.

Karp stressed that Palantir raised its full-year revenue outlook after a record third quarter, and the company’s shares have risen 173% over the past year.

Nvidia CEO Jensen Huang also disagreed with the investor’s concerns.

“I do not believe we are in an AI bubble,” he said, noting that the company plans to generate half a trillion dollars in revenue.

Huang argues that the United States is doing too little to advance artificial intelligence, and that restrictive policies toward China will ultimately harm American developers.

Even so, after news of Burry’s bet Palantir’s shares fell nearly 9%, and Nvidia’s by more than 3%.

The economic backdrop

Burry’s move comes amid a clear disconnect between Wall Street and the real economy. The seven largest technology firms, including Nvidia, account for 35% of the S&P 500’s market capitalisation.

Meanwhile, car repossessions are rising in the United States, wage growth is slowing and credit-card debt has hit record levels. According to Harvard economist Jason Furman, real economic growth is just 0.01% if the impact of AI and data centres is excluded.

Investment in information processing equipment & software is 4% of GDP.

But it was responsible for 92% of GDP growth in the first half of this year.

GDP excluding these categories grew at a 0.1% annual rate in H1. pic.twitter.com/7p1eAI1aAa

— Jason Furman (@jasonfurman) September 27, 2025

Gold advocate Peter Schiff agrees with Burry:

“If this [Burry’s bet] signals an aversion to risk in general, watch out for the even bigger AI bubble that could burst.”

The losses that will be suffered by Bitcoin HODLers and crypto investors will be staggering. More money will be lost in this bubble than was lost when the dot-com bubble popped. But if this signals an aversion to risk in general, look out for the even bigger AI bubble to burst.

— Peter Schiff (@PeterSchiff) November 5, 2025

Even OpenAI CEO Sam Altman acknowledged that the AI market is probably in a bubble, while calling the technology “the most important thing to have happened in a very long time”.

Burry himself, who has wagered about 80% of his portfolio on a fall in the AI market, wrote:

“Sometimes, we see bubbles. Sometimes, there is something to do about it. Sometimes, the only winning move is not to play.”

Sometimes, we see bubbles.
Sometimes, there is something to do about it.
Sometimes, the only winning move is not to play. pic.twitter.com/xNBSvjGgvs

— Cassandra Unchained (@michaeljburry) October 31, 2025

In November, HSBC CEO Georges Elhedery said that current revenues at AI companies may not justify their enormous compute costs.