While technology giants are still all in on AI, Wall Street is beginning to worry that over-investment in AI will not only fail to recoup costs but also create a bubble.

More and more Wall Street analysts and investors are questioning the huge investments in AI by technology giants, venture capital firms, and stock investors, believing that the enormous investment now does not correspond to the returns that AI can currently bring.

During Google's earnings call on Tuesday, CEO Sundar Pichai was asked when Google's $12 billion quarterly investment in AI would pay off. He also admitted that AI products take time to mature and become more useful. The high cost of AI, however, poses a greater risk if not enough investment is made.

The high cost of artificial intelligence, combined with the fact that the data centers and computer chips companies purchase can be used for other purposes even if the AI boom slows down, means that the risk of underinvestment is far greater than that of overinvestment.

It is clear that technology giants in the AI maelstrom and Wall Street, which is focused on money, have different opinions.

Wall Street cautioned that AI investment is overheated and the bubble is likely to burst.

In recent weeks, large Wall Street investment banks such as Goldman Sachs and Barclays, as well as venture capital firms like Sequoia Capital, have released reports expressing concerns about the sustainability of the AI craze, believing that AI technology has not yet reached the expected level of usefulness and that excessive investment may lead to a bubble bursting.

Jim Covello, a senior stock analyst at Goldman Sachs, said, "Despite massive investment in AI, the technology has not yet reached the expected level of usefulness, and spending a lot of money to build something that is not currently being used usually ends badly."

Barclays Bank said that there are currently few successful independent AI products besides OpenAI's ChatGPT and Microsoft's Copilot. Wall Street analysts generally expect that by 2026, major tech companies' annual investment in AI models will reach $60 billion, while annual revenue from AI will be about $20 billion. This indicates a huge uncertainty in investment returns.

Even David Cahn, a partner at Sequoia Capital, wrote an analysis last month, stating that the AI industry needs to generate approximately $600 billion in revenue annually to make up for all AI investments to date, but AI revenue is far from reaching that number.

Technology giants and venture capital firms are still crazy about investing in AI.

Although Wall Street is beginning to shake, supporters in Silicon Valley still insist that AI will change lives like the internet and mobile phones, especially since the release of ChatGPT in November 2022 has sparked a new round of AI product competition, causing share prices of technology giants to climb steadily.

Since the beginning of this year, Nvidia's stock price has risen 140%, while Alphabet, Google's parent company, and Microsoft's stock have risen 25% and 15%, respectively.

Venture capital firms do not want to miss the "next Nvidia" and are investing heavily in AI start-ups. Data shows that in the second quarter of 2024, the venture capital investment in AI start-ups in the United States reached $55.6 billion, the highest quarterly amount in two years.

Silicon Valley venture capitalist Vinod Khosla said that AI will have a profound impact on society like personal computers, the internet, and mobile phones. Although it may cause an investment bubble, this does not mean that AI technology itself will stop developing.

Many AI start-ups will fail, but overall, those who persist will make money in AI. Several companies with a market cap of over a trillion dollars will emerge in the AI field, such as humanoid robots, AI assistants, and other areas with huge potential.

Vineet Jain, CEO of AI data management company Egnyte, said that the cost of offering human AI products is currently too high, so it is difficult for companies in the industry to make money this year. With the advancement of AI technology, however, the cost of developing and running AI programs will decrease, and the situation will improve.

"Speculative frenzy is part of technological progress, so it is not scary. But we must not have the illusion that AI can make people rich quickly," said David Cahn, a partner at Sequoia Capital.

Speculative frenzy is a part of technological advancement, so it is not scary. However, we cannot have the illusion that AI can make people rich quickly.

Edited by Jeffrey